medium · FRM Part 2 Market Risk
In a 99% daily VaR backtest over 250 days, a model records 8 exceptions.
According to the regulatory 'traffic light' system, which zone does this fall into and what is the consequence?
- Yellow Zone; supervisory plus-factor is applied to the capital multiplier.
- Yellow Zone; the model is automatically rejected without appeal.
- Red Zone; the model is presumed invalid and must be withdrawn from use.
- Green Zone; no change is applied to the base 3.0 capital multiplier currently in use.
Sign up free to see the explanation and track your rank →
More FRM Part 2 Market Risk practice
- Which of the following statements correctly identifies a structural deficiency of the Gaus
- If the shape parameter is ξ = 0.25, what is the tail index α?
- A leptokurtic distribution, often modeled by EVT, is characterized by which of the followi
- In the GPD framework, if the threshold u is chosen too low, what is the most likely error
- If a bank records 11 exceptions in a 250-day backtesting window for 99% VaR, what is the r
- A fund manager calculates the 'Marginal VaR' for an equity p… — What does this metric spec
- Which fixed-income mapping technique treats a bond portfolio as a single zero-coupon bond
- What happens to the mean of a GPD-distributed variable if the tail index ξ ≥ 1?