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# Past FRM question: Binary option VAR

#### monsieuruzairo3

##### Member
Dear David Harper, CFA, FRM, CIPM ShaktiRathore

I am totally bamboozled by this past FRM question(FRM 2006). I know you said looking beyond 2009 paper was counterproductive but nonetheless was interested to know if it should be of concern for the Level 1

Imagine a portfolio which holds two binary options, each with the same payoff and probability: USD -100 with a probability of 4% and USD 0 with a 96% probability. Assuming the underlying has uncorrelated returns, what is the VaR (95% confidence level, 1 day)?
A.The VaR is zero
B.The VaR is USD 100
C.The VaR is USD 200
D.None of the above

Answer is B (no idea how )

Best
Uzi

cool

#### Elnur1

##### New Member
Dear David Harper CFA FRM ,CIPM if we calculated Var =-pq and the var 100 - 0.95*1.64 ?but there is showing that var is 100.It is DISTRICT for that we calculated it .

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Hi @Elnur1 I don't understand, sorry

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