Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter22:ValueatRiskMultipleChoiceTestBank:Questions1.Whichofthefollowingistrueofthe99.9%valueatrisk?A.Thereis1chancein10thatthelosswillbegreaterthanthevalueofriskB.Thereis1chancein100thatthelosswillbegreaterthanthevalueofriskC.Thereis1chancein1000thatthelosswillbegreaterthanthevalueofriskD.Noneoftheabove2.Thegainfromaprojectisequallylikelytohaveanyvaluebetween-$0.15millionand+$0.85million.Whatisthe99%valueatrisk?A.$0.145millionB.$0.14millionC.$0.13millionD.$0.10million3.Thegainfromaprojectisequallylikelytohaveanyvaluebetween−$0.15millionand+$0.85million.Whatisthe99%expectedshortfall?A.$0.145millionB.$0.14millionC.$0.13millionD.$0.10million4.WhichofthefollowingistrueofthehistoricalsimulationmethodforcalculatingVaR?A.ItfitshistoricaldataonthebehaviorofvariablestoanormaldistributionB.ItfitshistoricaldataonthebehaviorofvariablestoalognormaldistributionC.ItassumesthatwhatwillhappeninthefutureisarandomsamplefromwhathashappenedinthepastD.ItusesMonteCarlosimulationtocreaterandomfuturescenarios5.The10-dayVaRisoftenassumedtobewhichofthefollowingA.The1-dayVaRmultipliedby10B.The1-dayVaRmultipliedbythesquarerootof10C.The1-dayVaRdividedby10D.The1-dayVaRdividedbythesquarerootof106.Whichwastheminimumcapitalrequirementformarketriskinthe1996BISAmendment?A.Atleast3timesthe10-dayVaRwitha99%confidencelevelB.Atleast3times7-dayVaRwitha97%confidencelevelC.Atleast2times5-dayVaRwitha95%confidencelevelD.1-dayVaRwitha99%confidencelevel7.Aninvestorhas$2,000investedinstockAand$5,000instockB.ThedailyvolatilitiesofAandBare1.5%and1%respectivelyandthecoefficientofcorrelationis0.8.Whatistheoneday99%VaR?Assumethatreturnsaremultivariatenormal(NotethatN(-2.326)=0.01)A.$177B.$135C.$215D.$3318.WhatisthemethodoftestinghowoftenaVaRwithacertainconfidencelevelwasexceededinthepastcalled?A.StresstestingB.BacktestingC.EWMAD.Themodel-buildingapproach9.Whichofthefollowingistruewhendelta,butnotgamma,isusedincalculatingVaRforoptionpositions?A.VaRforalongcall...
