--%>

Explain valid criticisms of Value at Risk

Explain valid criticisms of Value at Risk.

E

Expert

Verified

Certainly, there are also valid criticisms too:

  • This does not tell you what the loss will be beyond the value at risk value
  • Value at risk is concerned with typical market circumstances, not the many more events
  • This uses historical data, 'like driving a car through looking in the rear-view mirror only'
  • In the time horizon positions could modify dramatically (because of normal trading or because of hedging or expiration of derivatives).

A common criticism of traditional Value at Risk has been that this does not satisfy all of specific commonsense criteria.

   Related Questions in Financial Management

  • Q : 10.1 Unfocused Books is a discount

    Unfocused Books is a discount retail bookshop that has three departments: fiction, non-fiction and children’s books. Sales and cost of sales for each department are shown below. In addition, each department has its own fixed costs for staffing and takes a one-third share of rental and management cos

  • Q : Advantages of investing by

    Describe the advantages of investing by international mutual funds? The advantages of investing by international mutual funds comprise: (1) save transaction/information costs,

  • Q : What is excess return What is excess

    What is excess return?

  • Q : How is quantity of model risk

    How is quantity of model risk dependency on vega hedge?

  • Q : How are you able to measure real

    How are you able to measure real probabilities?

  • Q : Appropriate demand of return for a

    How much more demand of return is appropriate for a share of common stock by risk-averse investors, when compared to a Treasury bill?

  • Q : HW Otobai Motor Company is currently

    Otobai Motor Company is currently paying a dividend of $1.40 per year. The dividends are expected to grow at a rate of 18% for the next three years and then a constant rate of 5% thereafter forever. What is the vlaue of its current stock price? Assuming that the discount rate is 10%.{Hint: pages 84-

  • Q : Basic business goals Explain basic

    Explain basic business goals?

  • Q : Derivative Securities Assignment Help

    Question 1  Four European vanilla Call options Ci ( ⋅) on an underlier with no interim cash flows, have identicalmaturity T . Their strike prices K i are such that K1 < K 2 < K 3 < K 4 and all strikes are equallyspaced. Interest rates are equ

  • Q : Difference in cash budget and pro forma

    Explain the dissimilarities in a cash budget and pro forma financial statements? Why pro forma financial statements are not utilized to forecast cash requirements.