Value at Risk estimates for portfolios must take into account the correlations among the various assets and liabilities in a portfolio.

Question

Quizplus · Accepted Answer

Correlations among assets and liabilities in a portfolio can have a significant impact on the overall risk of the portfolio, and therefore must be considered in Value at Risk estimates. Ignoring correlations can lead to an underestimation of risk and potentially result in unexpected losses.

Value at Risk Estimates for Portfolios Must Take into Account