You are a very conservative investor and thus want to keep a low risk portfolio. Which one of the following VaR measures would be best for your investment goal? A) Prob (R_p $\le$ -0.09) = 100% B) Prob (R_p $\le$-0.09) = 50% C) Prob (R_p $\le$ -0.09) = 25% D) Prob (R_p $\le$-0.09) = 10% E) Prob (R_p $\le$-0.09) = 1%

Question

Quizplus · Accepted Answer

As a conservative investor with a low risk portfolio, it is most appropriate to choose a VaR measure with a low probability of occurrence. A higher probability implies that there is a higher likelihood of experiencing losses beyond the specified limit. Thus, the best choice for this type of investor is a VaR with a low probability of occurrence. Option E has the lowest probability of 1%, which indicates a very low probability of experiencing losses beyond the specified limit.

You Are a Very Conservative Investor and Thus Want to Keep