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

Quizplus · Accepted Answer

The maximum one-day loss computed for the VAR method considers the expected percentage change in the currency, the standard deviation of the daily percentage changes, and the confidence level used. It does not depend on the current level of interest rates.

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