Financial analysts often investigate the value at risk (VAR) with simulation models. VAR is an indicator of:
A) how much to bid for a project
B) the expected amount of loss for a project
C) what is nearly the worst possible outcome for a project
D) the required amount of investment required for a project
E) none of these choices

Question

Quizplus · Accepted Answer

VAR is a measure of the potential loss that could occur in a portfolio of assets or investment over a certain time period, under normal market conditions, at a specified confidence level. It represents the maximum loss that might occur with a specified probability (e.g. 5%). Therefore, it is an indicator of what is nearly the worst possible outcome for a project.

Financial Analysts Often Investigate the Value at Risk (VAR) with Simulation