medium · Frm Part 2 Market Risk
A bank's backtesting of its 99%, 1-day VaR over 250 days reveals 8 exceptions.
According to the Basel Traffic Light regime, what is the status of the model and the likely regulatory multiplier?
- Yellow zone; the model is valid, but the bank must switch to Expected Shortfall
- Green zone; the model is valid with a multiplier of 3.0
- Red zone; the model is presumed broken with an automatic multiplier of 4.0
- Yellow zone; the multiplier will increase from 3.0 toward 4.0
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