The Value at Risk approach:
A) chooses the valuable large outcome over small in a portfolio .
B) determines the highest expected value of terminal wealth in a portfolio.
C) only looks at the likelihood of bad outcomes.
D) involves a trade-off of expected return and a bad outcome in a portfolio.

Question

Quizplus · Accepted Answer

Value at Risk (VaR) focuses on assessing the potential for loss in a portfolio by estimating the likelihood of bad outcomes, specifically the maximum loss expected over a given time period at a certain confidence level.

The Value at Risk Approach