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Part II
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Market Risk Measurement and Management
Market Risk Measurement and Management
Medium
A standard historical simulation model uses a 250-day window. On day 251, a large loss that occurred on day 1 drops out of the window, causing VaR to decrease by $3M despite no change in market conditions. This phenomenon is known as:
A
The ghost effect, where VaR changes discretely as extreme observations enter or exit the rolling window
B
Mean reversion of VaR toward its long-run average
C
Model recalibration improving VaR accuracy
D
Procyclical VaR behavior required by Basel
Select an answer to continue
Tags
#ghost-effects
#historical-simulation
#var-weakness
#rolling-window
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