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.


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  • CreatedJuly 30, 2015
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