easy · Frm Part 2 Market Risk
Which change in a backtesting protocol would most effectively decrease the probability of a Type II error without changing the sample size?
- Using only Actual P&L instead of Hypothetical P&L.
- Decreasing the confidence level of the test (e.g., from 99% to 95%).
- Reducing the capital multiplier in the Yellow Zone.
- Increasing the VaR confidence level from 99% to 99.9%.
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