VaR as a risk measure has the following deficiency:
A)It does not consider the shape of losses in the left tail of the P&L distribution.
B)It does not consider the shape of losses outside the left tail of the P&L distribution.
C)Neither of the above.
D)Both of the above.

Question

Quizplus · Accepted Answer

VaR does not consider the shape of losses in the left tail of the P&L distribution as well as the shape of losses outside the left tail of the P&L distribution, making it deficient as a risk measure. Therefore, both choices A and B are correct.

VaR as a Risk Measure Has the Following Deficiency