alleryStart learning →What does Value at Risk (VaR) estimate?
AExpected firm profit for next year
BPossible loss with a given probability
CTotal debt a borrower can service
DCurrent market value of one bond
Answer & Solution
Correct answer: B. Possible loss with a given probability
VaR gives a loss amount that is exceeded only with a stated small probability over a chosen horizon under normal market conditions.
Keep practising Risk Management
Browse all Risk Management questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
What does an option give its buyer?Which contract is standardized in terms of asset, quantity, price and date?An investor holds a stock and buys an option to sell it at a set price. What is the cost oWhat is hedging?What went wrong with diversification in the late-2000s recession?Diversification benefits increase when the correlation between assets is what?Who initiated modern portfolio theory in 1952 with the thesis "Portfolio Selection"?In modern portfolio theory, how is the risk of a portfolio defined?