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

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.

Quizplus · Accepted Answer

VaR measures only consider the potential losses in the left tail of the P&L distribution and do not account for the shape of losses outside the left tail. Therefore, VaR has the deficiency of not considering the shape of losses in both the left tail and outside the left tail of the P&L distribution.

VaR as a Risk Measure Has the Following Deficiency