IFoA SP9 Practice Questions - IFoA SP9 Enterprise Risk Management Specialist Principles Exam

A bank computes a one-day 99% Value at Risk (VaR) of £4 million on its trading book. Which interpretation is correct?

With 99% confidence, the one-day loss is not expected to exceed £4 million, i.e. losses exceed it on about 1 day in 100 The maximum possible one-day loss is £4 million The portfolio will lose exactly £4 million tomorrow There is a 99% probability that the loss over one day will exceed £4 million

Correct Answer:

With 99% confidence, the one-day loss is not expected to exceed £4 million, i.e. losses exceed it on about 1 day in 100

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