Free ICBRR Exam Braindumps (page: 45)

Returns on two assets show very strong positive linear relationship. Their correlation should be closest to which of the following choices?

James Johnson has a $1 million long position in ThetaGroup with a VaR of 0.3 million, and $1 million long position in VolgaCorp with a VaR of 0.4 million. The returns of the two companies have zero correlation.
What is the portfolio VaR?

What are some of the drawbacks of correlation estimates? Which of the following statements identifies major problems with correlation calculations?

I) Correlation estimates are not able to capture increases in factor co-movements in extreme market scenarios.
II) Correlation estimates tend to be unstable.
III) Historical correlations may not forecast future correlations correctly.
IV) Correlation estimates assume normally distributed returns.

Which one of the following four statements best describes challenges of delta-normal method of mapping options positions?
Delta-normal method understates