medium · FRM Part 1
If a bank increases the confidence level of its Value-at-Risk (VaR) model from 95% to 99%, what is the impact on the parametric VaR for a normally distributed portfolio?
- The VaR increases because the z-multiplier rises from 1.645 to 2.326.
- The VaR decreases because the probability of an exceedance is reduced.
- The VaR remains unchanged because the portfolio's standard deviation is constant.
- The VaR increases by exactly 4%, reflecting the change in confidence.
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