Which of the following measures of risk best highlights the potential loss from extreme negative returns?
A)Standard deviation
B)Variance
C)Upper partial standard deviation
D)Value at risk (VaR)

Question

Quizplus · Accepted Answer

Value at risk (VaR) is a measure of the maximum potential loss that could occur over a given time horizon at a given confidence level. It explicitly accounts for extreme negative returns and provides a quantifiable measure of the potential downside risk. In contrast, standard deviation, variance, and upper partial standard deviation may provide information on the overall variability of returns but do not focus specifically on extreme negative outcomes.

Which of the Following Measures of Risk Best Highlights the Potential