medium · FRM Part 2 Risk & Investment Management
Which of the following is a common error when evaluating a potential trade using Marginal VaR?
- Including the correlation between the new trade and the rest of the existing book.
- Calculating the risk derivative with respect to the trade's position size.
- Using a 99% level instead of the more standard 95% confidence level.
- Assuming the risk impact is linear and neglecting the trade's own variance.
Sign up free to see the explanation and track your rank →
More FRM Part 2 Risk & Investment Management practice
- A hedge fund strategy captures frequent small gains but suff… — This risk profile is most
- An active manager has an Information Coefficient (IC) of 0.06 and a breadth (BR) of 400 in
- A risk manager is evaluating an 'Illiquid Asset' (e.g., Priv… — Why is the 'Autocorrelatio
- If the reported volatility is 10% and the first-order autocorrelation (φ) of returns is 0.
- In the context of Liquidity Risk, the 'Denominator Effect' refers to which of the followin
- If the manager effectively doubles the breadth (BR) of the strategy while maintaining the
- If the returns exhibit an autocorrelation of φ = 0.50, what is the corrected Sharpe ratio
- What is the most defensible estimate for the fund's 'true' economic beta?