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
The Answer Is:
B
This question includes an explanation.
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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