A risk manager simulates the Worst Case Scenario (WCS) data in the following table using 10,000 random vectors for time horizons, H, of 50 and 100.
| Time Horizon = H |
H = 50 |
H = 100 |
| Expected number of Z < -2.33 |
1.00 |
2.00 |
| Expected number of Z < -1.65 |
2.00 |
6.00 |
| Expected WCS |
-2.02 |
-2.88 |
| WCS 1 percentile |
-3.55 |
-4.02 |
| WCS 5 percentile |
-2.43 |
-3.37 |
Which of the following statements is (are) CORRECT?
- The one percent value-at-risk (VAR) is –2.33.
- The one percent WCS for a holding period of 100 is -2.33.
- One percent VAR is expected to be exceeded twice over 100 trading periods.
A. I only.
B. I and III.
C. II only.
D. I, II and III.
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