8008 Exam Dumps | Which of the following methods cannot be used to calculate Liquidity at Risk?

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PRM Certification - Exam III: Risk Management Frameworks, Operational Risk, Credit Risk, Counterparty Risk, Market Risk, ALM, FTP - 2015 Edition
PRMIA.8008.v2021-08-28.q125
Question 96

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Question 96/125

Which of the following methods cannot be used to calculate Liquidity at Risk?

A. Monte Carlo simulation

B. Analytical or parametric approaches

C. Historical simulation

D. Scenario analysis

Correct Answer: B

Explanation
Analytical or parametric approaches are not useful at all for liquidity at risk calculations because there are no neat distributions available to parameterize the large number of factors that affect the calculations of liquidity inflows and outflows. Historical simulations, Monte Carlo and scenario analysis (which can complement historical scenarios) are all valid choices

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