Ex-ante VaR estimates may differ from realized P&L due to:

Ex-ante VaR estimates may differ from realized P&L due to:

I. the effect of intra day trading

II. timing differences in the accounting systems

III. incorrect estimation of VaR parameters

IV. security returns exhibiting mean reversion
A . I and III
B . II, III and IV
C . I, II and III
D . I, II and IV

View Answer

Answer: C

Explanation:

Ex-ante VaR calculations can differ from actual realized P&L due to a large number of reasons. I, II and III represent some of them. Mean reversion however has nothing to do with VaR estimates differing from actual P&L. Therefore Choice ‘c’ is the correct answer.