In the RiskMetrics model, value at risk (VAR) is calculated as
A)the price sensitivity times an adverse daily yield move.
B)the dollar value of a position times the price volatility.
C)the dollar value of a position times the potential adverse yield move.
D)the price volatility times the √N.
E)DEAR times the √N.

Question

Quizplus · Accepted Answer

The RiskMetrics model calculates value at risk (VAR) using the Daily Earnings at Risk (DEAR) multiplied by the square root of the number of days (√N) to account for the time horizon.

In the RiskMetrics Model, Value at Risk (VAR) Is Calculated