# Question

The calculations in Section 15.3 assume that the investments in the DJIA, FTSE 100, CAC 40, and Nikkei 225 are $4 million, $3 million, $1 million, and $2 million, respectively. How do the VaR and ES change if the investment are $3million, $3 million, $1 million, and $3 million, respectively? Carry out calculations when

(a) volatilities and correlations are estimated using the equally weighted model

(b) when they are estimated using the EWMA model. What is the effect of changing from 0.94 to 0.90 in the EWMA calculations? Use the spreadsheets on the author’s web site.

(a) volatilities and correlations are estimated using the equally weighted model

(b) when they are estimated using the EWMA model. What is the effect of changing from 0.94 to 0.90 in the EWMA calculations? Use the spreadsheets on the author’s web site.

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