The value at risk of a bank can change with the risk tolerance of the bank.

Question

Quizplus · Accepted Answer

The value at risk of a bank is directly related to the risk tolerance of the bank. If a bank has a high risk tolerance, it may take on riskier assets that have a higher potential for return but also a higher potential for loss, resulting in a higher value at risk. Conversely, if a bank has a lower risk tolerance, it may invest in safer assets with a lower potential for return but also a lower potential for loss, resulting in a lower value at risk.

The Value at Risk of a Bank Can Change with the Risk