Value-at-Risk (VaR)is most closely defined as
A)The probability of a specified level of negative return of a portfolio in the left tail of its profit-and-loss distribution.
B)The dollar loss at which a pre-specified cumulative probability occurs in the left tail of the profit-and-loss distribution.
C)The probability of a negative return below a specified threshold in the left tail of the distribution.
D)The negative return rate for which a pre-specified probability lies in the left tail of the distribution.

Question

Quizplus · Accepted Answer

Value-at-Risk (VaR) is defined as the dollar amount of loss that will not be exceeded with a certain confidence level over a specific period. It is a measure of the risk of loss on a portfolio. Choice B accurately describes VaR as the dollar loss corresponding to a particular probability in the left tail of the profit-and-loss distribution, which is where losses are found.

Value-At-Risk (VaR)is Most Closely Defined as