Which of the following is the best definition for the concept of value at risk (VaR)?
A) The return earned in an average year over a multi-year period.
B) The hypothesis is that actual capital markets are efficient.
C) The average squared deviation between the actual return and the average return.
D) Statistical measure of maximum loss used by banks and other financial institutions to manage risk exposures.
E) The positive square root of the variance.

Question

Quizplus · Accepted Answer

Value at Risk (VaR) is a statistical measure used to assess the level of financial risk within a firm or investment portfolio over a specific time frame. It estimates the maximum potential loss with a given confidence level, making it a crucial tool for risk management in banks and financial institutions.

Which of the Following Is the Best Definition for the Concept