aianjie

 

The correct answer is D

A wider potential loss distribution is associated with a larger economic capital estimate. Simulating changes in market rates is the initial step in simulating economic capital and requires correlations in addition to market rates and long-term volatility. Economic capital measures the potential unexpected loss in economic value over some specified time period. The shape of the loss distribution is based on several factors, including type of risk, definition of loss, time horizon, degree of concentration of risk exposure, and assumptions underlying the simulation of future states.

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