Your question is Value at Risk and Tail Risk. Take a moment with it on the right.
Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).
Explain the three methods of VaR.
Discuss historical simulation, parametric variance-covariance VaR, and Monte Carlo simulation. For each method, explain the required inputs, core calculation, key assumptions, treatment of nonlinear positions, and principal limitations. Then compare the illustrative one-day, 99% VaR estimates below, recommend which figure should drive a risk limit, and explain how you would validate the model through backtesting and stress testing.