Question
A portfolio manager estimates that the volatility of her daily portfolio returns is 1.2%. She also expects this portfolio to bring a return of
A portfolio manager estimates that the volatility of her daily portfolio returns is 1.2%. She also expects this portfolio to bring a return of 6% per year. Assume that there are 252 trading days in a year. The current value of her portfolio is $10,000,000. (a) (b) (c) Calculate a 5-day VaR ($) at the 97,5% confidence level What is the 95% confidence interval of the value of this portfolio after 20 days? Suppose the value of a portfolio dropped by $555,000 in 10 days. What is the chance of this happening? (d) Up to what horizons (number of days) can she hold this portfolio with a 99% confidence that her total loss will not be more than 30%? Show your work. State your answer in number of days
Step by Step Solution
3.32 Rating (134 Votes )
There are 3 Steps involved in it
Step: 1
a The 5day VaR at the 975 confidence level can be calculated as follows 5day VaR portfolio value x volatility x zscore where zscore is the number of s...Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started