Which one of the following statements regarding the variance-covariance method for calculating value-at-risk is true?

Question

Options

• AThe volatilities of the underlying assets are normally distributed and the prices remain constant.
• BThe risk factors are normally distributed and volatilities of risk factors and correlations between risk factors
• CThe prices of underlying assets are normally distributed, the volatilities of risk factors follow a GARCH
• DThe returns of underlying assets are normally distributed and volatilities of risk factors and correlations

• A
  4% (1)
• B
  15% (4)
• C
  4% (1)
• D
  78% (21)

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