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PRMIA Exam 8008 Topic 1 Question 25 Discussion

Actual exam question for PRMIA's Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP ? 2015 Edition exam
Question #: 25
Topic #: 1
[All Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP ? 2015 Edition Questions]

Which of the following statements is true in respect of different approaches to calculating VaR?

I,Linear or parametric VaR does not take correlations into account

II,For large portfolios with little or no optionality or other non-linear attributes, parametric VaR is an efficient approach to calculating VaR

III,For large portfolios with complex sources of risk and embedded optionalities, the full revaluation method of calculating VaR should be preferred

IV. Delta normal local revaluation based VaR is suitable for fixed income and option portfolios only

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Suggested Answer: C

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