What is the correct interpretation of a EUR 2,000,000.00 overnight VaR figure with a 97% confidence level?
A) A loss of at least EUR 2,000,000.00 can be expected in 97 out of the next 100 days.
B) A loss of at most EUR 2,000,000.00 can be expected in 3 out of the next 100 days.
C) A loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days.
D) A loss of at most EUR 2,000,000.00 can be expected in 6 out of the next 100 days.

Question

Quizplus · Accepted Answer

The correct interpretation of an overnight VaR (Value at Risk) figure with a 97% confidence level is that a loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days. This means that there is a 97% probability that the loss in the portfolio will not exceed EUR 2,000,000.00 over the next 24 hours. Therefore, option C is the best choice.

What Is the Correct Interpretation of a EUR 2,000,000