Earnings at Risk is a better risk measure for a derivatives dealer than is Value at Risk.

Question

Quizplus · Accepted Answer

Earnings at Risk (EaR) and Value at Risk (VaR) serve different purposes; VaR is more widely used in risk management for derivatives dealers because it estimates the maximum loss over a specific time period at a certain confidence level, making it more directly applicable to the risks associated with derivatives trading.

Earnings at Risk Is a Better Risk Measure for a Derivatives