Which of the following statements about stress testing are true?
I. Stress testing can complement VAR estimation in helping risk managers identify crucial vulnerabilities in a portfolio.
II. Stress testing allows users to include scenarios that did not occur in the lookback horizon of the VAR data but are nonetheless possible.
III. A drawback of stress testing is that it is highly subjective.
IV. The inclusion of a large number of scenarios helps management better understand the risk exposure of a portfolio.
A. I and II only.
B. III and IV only.
C. I II and III only.
D. I II III and IV.
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