easy · FRM Part 1 Valuation and Risk Models
A risk manager reports a one-day Value at Risk (VaR) of $5 million at the 99% confidence level.
Which statement correctly interprets this metric?
- There is a 1% probability that the loss over the next day will be $5 million or greater.
- The maximum possible loss the portfolio can sustain in a single day is $5 million.
- There is a 99% probability that the portfolio will lose exactly $5 million over the next day.
- The expected loss on the portfolio over the next day is $5 million.
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