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Consider the delta-normal and full-revaluation approaches to estimating the VAR of non-linear derivative instruments. Which of the following is NOT a requirement for either the delta-normal or full-revaluation approach? A. The VAR(1%) of the underlying asset is adjusted by a factor reflecting the price sensitivity of the derivative price to changes in the underlying asset price. B. A second order adjustment is made to the underlying asset VAR(1%) to account for the non-linear relationship between the derivative and the underlying asset. C. The VAR(1%) of the derivative is calculated by revaluing the derivative at the price corresponding to a VAR(1%) decline in the value of the underlying asset. D. The VAR(1%) of the asset underlying the derivative is based on an assumed normal distribution. |