Exercises

VaR plot

You can see the value-at-risk plot at the 5% and 1% loss probabilities for the daily Microsoft returns. Which of the following statements is wrong?

50 XP

The red crosses correspond to exceedances.

The less exceedances, the better.

The predicted VaR depends on the model used.

Since the number of observations is 2280, we expect around 23 and 114 exceedances for the 1% and 5% VaR.