When measuring exposure to market risk, banks commonly use the ________.

Question

Quizplus · Accepted Answer

The value-at-risk (VaR) method is widely used by banks to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. This method provides a probabilistic estimate of the potential loss in value of a risky asset or portfolio due to market movements under normal market conditions, making it a key tool for managing market risk.

When Measuring Exposure to Market Risk, Banks Commonly Use the ________