FRM二级《操作及综合风险管理》The risk management group estimates

The risk management group estimates the 1-day 99% VaR on a long-only, large-cap equity portfolio using a variety of approaches.

A daily risk report shows the following information:1-day 99% VaR Estimates (by approach):

Delta-Normal VaR : 321,890

Monte Carlo Simulation VaR: 353,851

Historical Simulation VaR: 375,534

Which of the following is the most likely explanation for the variation in VaR estimates?

A. Data problems

B. Differences in model assumptions

C. Endogenous model risk

D. Programming errors


Answer: B


VaR measures will vary according to the approach (delta-normal, historical simulation, Monte Carlo simulation).


The variation in these values does not suggest bigger problems with data or programming/implementation nor is there any reason to suspect endogenous model risk (e.g., traders gaming the system to lower risk values).