Why in this case only one answer is correct , the question"which statements are MOST LIKELY accurate"?
All 3 choices look valid to me :
a) The combined daily VaR is less than 20 Mil.(this is the correct answer )
b) fixed income desk generates better returns on its allocated capital given VaR (why this is not correct? 15% return FI desk vs 12,5% Equity desk for the same VaR)
c) trading desks have the same risk budget (why this is not correct ? both had the same VaR)
Those are all correct but solution A is more correct than two others like in Ethics.
They highlighted units mutual correlation significance in Enterprise Risk Management if it is of any help.
I’ve chosen A for this question;) , but still don’t get what is wrong with the other two, the only reason for B being wrong (maybe I did the wrong calculations) and for C being wrong (maybe risk budgeting means more than just the same VaR)
Same here. This is one of those questions where more than 1 answer seems correct. Choose the most correct one.
I think I just realized that option B is wrong if they mean “better returns” in absolute terms (25 Equity vs 15 FI ) not in relative terms (%) :)) .
in this case the main purpose for this question is to rather trick us than to learn anything out of it.