Which of the following statements is true?
A)Daily earnings at risk are defined as the dollar market value of a position plus the price sensitivity of the position plus the potential adverse move in yield.
B)Daily earnings at risk are defined as the dollar market value of a position multiplied by the price sensitivity of the position multiplied by the potential adverse move in yield.
C)Daily earnings at risk are defined as (the dollar market value of a position plus the price sensitivity of the position) multiplied by the potential adverse move in yield.
D)Daily earnings at risk are defined as the dollar market value of a position divided by (the price sensitivity of the position plus the potential adverse move in yield).

Question

Quizplus · Accepted Answer

Daily earnings at risk are calculated by multiplying the dollar market value of a position by its price sensitivity and then by the potential adverse move in yield. This method quantifies the potential loss in value of a position due to adverse movements in market variables.

Which of the Following Statements Is True