April 2021 CM2A Q7(iv)

Discussion in 'CM2' started by rlsrachaellouisesmith, Sep 22, 2021.

  1. rlsrachaellouisesmith

    rlsrachaellouisesmith Ton up Member

    Hi

    Could it be argued that the investor is showing the availability heuristic:
    · The investor is also showing the availability heuristic. The investor is familiar with the 1 in 50 VaR being a loss of 10%, they find it very difficult to imagine that a 25% loss is possible and so will underestimate the probability of its occurrence.

    Thank you
     

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