2016-FRR practice

Q1 Single choice

In its VaR calculations, JPMorgan Chase uses an expected tail-loss methodology which approximates losses at the 99% confidence level. This methodology consists of two subsequent steps to estimate the VaR.

Which of the following explains this two-step methodology?

A
After VaR is computed at the 97% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 99% confidence level.
B
After VaR is computed at the 99% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 98% confidence level.
C
After VaR is computed at the 99% confidence level, the expected tail loss in excess of that confidence level is determined, which is then compared with the VaR estimate at the 99% confidence level.
D
After VaR is computed at the 1% confidence level, the expected tail loss in excess of that confidence level is determined, which and is then compared with the VaR estimate at the 98% confidence level.