Find the statement that interpretes a $10 million overnight VaR figure with 99% confidence level most correctly.
A. The institution can be expected to lose at most $10 million in 1 out of next 100 days.
B. The institution can be expected to lose at least $10 million in 99 out of next 100 days.
C. The institution can be expected to lose at least $10 million in 1 out of next 100 days.
D. The institution can be expected to lose at most $10 million in 99 out of next 100 days.
Answer: C
VaR provides a loss estimate that is expected to be exceeded with the frequency at which the VaR was calculated.
