FRM 2026 Part I Quantitative Analysis Value at Risk Free Quiz 2

Practice FRM 2026 Part I Quantitative Analysis MCQs from Value at Risk. Get instant results with Explanation.

General10 MCQs

1. Is VaR a coherent risk measure?

A. VaR is not subadditive, hence not a coherent risk measureB. VaR is subadditive in all casesC. VaR is a coherent risk measureD. CVaR is not coherent

2. What is the difference between Incremental VaR and Marginal VaR?

A. Incremental VaR is the same as Marginal VaRB. Incremental VaR measures the average VaRC. Marginal VaR measures the total VaRD. Incremental VaR measures the change in VaR when a position is added; Marginal VaR measures sensitivity to small changes

3. What is the Cornish-Fisher expansion used for in VaR?

A. Cornish-Fisher expansion assumes normal distributionB. Cornish-Fisher expansion adjusts VaR for skewness and kurtosisC. Cornish-Fisher expansion is used for historical VaRD. Cornish-Fisher expansion is not used in practice

4. What is the delta-normal VaR method?

A. Delta-normal method is used for option portfoliosB. Delta-normal method is non-parametricC. Delta-normal method assumes linearity and normal distributionsD. Delta-normal method is the same as historical simulation

5. What are the advantages and disadvantages of historical simulation VaR?

A. Historical simulation is easy to implement but assumes past is representativeB. Historical simulation is always accurateC. Historical simulation is parametricD. Historical simulation is not used in practice

General10 MCQs

6. What is a limitation of VaR?

A. VaR is a complete measure of riskB. VaR captures all tail risksC. VaR is always expressed as a percentageD. VaR is not a complete measure of risk as it ignores losses beyond the confidence level

7. What change did FRTB bring to market risk measurement?

A. FRTB still uses VaR for market risk capitalB. FRTB replaces VaR with Expected Shortfall (ES) for market risk capitalC. FRTB eliminates capital requirements for market riskD. FRTB uses historical simulation only

8. How does correlation affect portfolio VaR?

A. Correlation does not affect VaRB. Higher correlation reduces VaRC. Higher correlation increases VaR due to reduced diversificationD. VaR is independent of correlation

9. How should the risk horizon be chosen for VaR?

A. The risk horizon should consider asset liquidityB. The risk horizon is always 1 dayC. The risk horizon is fixed regardless of asset typeD. The risk horizon is not a consideration in VaR

10. How is VaR used in risk budgeting?

A. VaR is not used for risk budgetingB. Risk budgeting is only for credit riskC. Risk budgeting is the same as capital allocationD. VaR is used for risk budgeting to allocate risk across units

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