如题

问题如下：

Question With respect to a bank's sensitivity to market risk, covariance adjustment reflects that its total VaR on a given day is:

选项：

A.A.less than the sum of the VaRs relating to each individual risk type. B.B.equal to the sum of the VaRs relating to each individual risk type. C.C.greater than the sum of the VaRs relating to each individual risk type.

解释：

Solution

1. Correct because covariance adjustment reflects the fact that the risks within each and across risk types are not perfectly correlated and, consequently, the total VaR on a given day will be lower than the sum of the VARs relating to each individual risk type.

2. Incorrect because covariance adjustment reflects the fact that the risks within each and across risk types are not perfectly correlated and, consequently, the total VaR on a given day will be lower than the sum of the VARs relating to each individual risk type.

3. Incorrect because covariance adjustment reflects the fact that the risks within each and across risk types are not perfectly correlated and, consequently, the total VaR on a given day will be lower than the sum of the VARs relating to each individual risk type.

Analysis of Financial Institutions

• explain the CAMELS (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity) approach to analyzing a bank, including key ratios and its limitations