The maximum one-day loss computed for the value-at-risk (VaR) method does not depend on:
A) the expected percentage change in the currency for the next day.
B) the standard deviation of the daily percentage changes in the currency over a previous period.
C) the current level of interest rates.
D) the confidence level used.

Question

​The maximum one-day loss computed for the value-at-risk (VaR) method does not depend on:
A) ​the expected percentage change in the currency for the next day.
B) ​the standard deviation of the daily percentage changes in the currency over a previous period.
C) ​the current level of interest rates.
D) ​the confidence level used.

Quizplus · Accepted Answer

The maximum one-day loss computed for the VaR method does not depend on the current level of interest rates. It depends on the expected percentage change in the currency for the next day, the standard deviation of the daily percentage changes in the currency over a previous period, and the confidence level used.

​The Maximum One-Day Loss Computed for the Value-At-Risk (VaR) Method

The Maximum One-Day Loss Computed for the Value-At-Risk (VaR) Method