The difference between standard deviation and value at risk is:
A)Nothing, they are two names for the same thing
B)Value at risk is a more common measure in financial circles than is standard deviation
C)Standard deviation reflects the spread of possible outcomes where value at risk focuses on the value of the worst outcome
D)Value at risk is expected value times the standard deviation

Question

Quizplus · Accepted Answer

Standard deviation and value at risk are not the same thing. Standard deviation measures the spread of possible outcomes while value at risk focuses on the value of the worst outcome. Value at risk is a commonly used measure in financial circles, but it is not the same as standard deviation. Choice A is incorrect because they are not the same thing. Choice B is partially correct, but it does not fully explain the difference between the two measures. Choice D is incorrect, as value at risk is not expected value times standard deviation.

The Difference Between Standard Deviation and Value at Risk Is