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1GOAL SHEET 4: VALUE AT RISKLearning Goal(s):Examine the various approaches to measuring risk. The approaches include volatility, Value-at-Risk and Cash-flow-at-Risk and how these can be implemented. Cases:Hedging Currency Risk at AIFS; Risk Management at Apache Background Material:“A Firm-wide Approach to Risk Management” (Ch. 4, Stulz); “A Comparables Approach to Measuring Cashflow-at-Risk for Non-Financial Firms” (Stein, et al); “Identifying and Quantifying Exposures”(Stulz and Williamson). Issues to ponder: How should firms measure their risk and how can the mesurement tool be implemented?1.Which of the following is true of the 1% Value at Risk measure? A.There is 1 chance in 10 that the loss will be greater than the value of risk B.There is 1 chance in 100 that the loss will be greater than the value of risk C.There is 1 chance in 1000 that the loss will be greater than the value of risk D.None of the aboveAnswer: B 2.Which of the following is true of the historical simulation method for calculating VaR?