Question: 1) Use the data below to compute the VaRt+10 using a model in which the innovation term is distributed as a standard normal and

Innovations 0.029825377 Adj Close Log-Ret Losses 7/1/08 1284.91 0.0038286 -0.0038286 0.00016052 0.302186572

1) Use the data below to compute the VaRt+10 using a model in which the innovation term is distributed as a standard normal and the variance is given by the RiskMetrics model, that is: Rt+1 = Ot+1t+1 where Zt+1~N(0,1) and o+ = 2o + (1 - 1)R Hint: Estimate the RiskMetrics model on the full sample. Innovations 0.029825377 Adj Close Log-Ret Losses 7/1/08 1284.91 0.0038286 -0.0038286 0.00016052 0.302186572 0.029825377 7/2/08 1261.52 -0.0183713 0.01837133 0.0001467 -1.516792509 0.029825377 7/3/08 1262.9 0.00109332 -0.0010933 0.000167147 0.084566507 0.029825377 7/7/08 1252.31 -0.0084208 0.00842082 0.000151282 -0.684638399 0.029825377 7/8/08 1273.7 0.0169362 -0.0169362 0.000144127 1.410728247 0.029825377 7/9/08 1244.69 -0.0230395 0.02303955 0.000159679 -1.823268352 0.029825377 7/10/08 1253.39 0.00696538 -0.0069654 0.000198481 0.494407311 0.029825377 7/11/08 1239.49 -0.0111519 0.01115188 0.000184243 -0.821584428 0.029825377 7/14/08 1228.3 -0.0090689 0.00906891 0.000179174 -0.677511667 0.029825377 7/15/08 1214.91 -0.0109611 0.0109611 0.000170335 -0.839851884 0.029825377 7/16/08 1245.36 0.02475464 -0.0247546 0.000166252 1.919875351 0.029825377 7/17/08 1260.32 0.01194101 -0.011941 0.000212729 0.818705205 0.029825377 7/18/08 1260.68 0.0002856 -0.0002856 0.000206616 0.019869079 0.029825377 7/21/08 1260 -0.0005395 0.00053954 0.00018662 -0.039495006 0.029825377 7/22/08 1277 0.01340186 -0.0134019 0.000168681 1.031887756 0.029825377 7/23/08 1282.19 0.00405598 -0.004056 0.000170819 0.310332535 0.029825377 7/24/08 1252.54 -0.0233961 0.02339606 0.000156133 -1.872387795 0.029825377 7/25/08 1257.76 0.00415887 -0.0041589 0.000196981 0.296321317 0.029825377 7/28/08 1234.37 -0.0187716 0.01877164 0.000179718 -1.400252063 0.029825377 7/29/08 1263.2 0.02308747 -0.0230875 0.000198318 1.639438476 7/30/08 1284.26 0.01653449 -0.0165345 0.000233413 1.08225236 0.029825377 7/31/08 1267.38 -0.0132309 0.0132309 0.000238508 -0.856718247 0.029825377 8/1/08 1260.31 -0.0055941 0.00559405 0.000233076 -0.366419329 0.029825377 8/4/08 1249.01 -0.0090065 0.00900648 0.000213563 -0.616299869 0.029825377 8/5/08 1284.88 0.02831409 -0.0283141 0.000201108 1.996584454 0.029825377 8/6/08 1289.19 0.00334879 -0.0033488 0.000263264 0.206391328 0.029825377 8/7/08 1266.07 -0.0180965 0.0180965 0.000238635 -1.171459225 0.029825377 8/8/08 1296.32 0.02361187 -0.0236119 0.000248705 1.497229083 0.029825377 8/11/08 1305.32 0.00691874 -0.0069187 0.000281164 0.412617394 0.029825377 8/12/08 1289.59 -0.0121239 0.01212388 0.000258444 -0.754151725 0.029825377 8/13/08 1285.83 -0.0029199 0.00291991 0.000248125 -0.185367899 0.029825377 8/14/08 1292.93 0.00550654 -0.0055065 0.000224764 0.36729527 0.029825377 8/15/08 1298.2 0.00406773 -0.0040677 0.000205999 0.283413057 0.029825377 8/18/08 1278.6 -0.015213 0.01521296 0.000187741 -1.110283305 0.029825377 8/19/08 1266.69 -0.0093585 0.00935853 0.000193215 -0.673267507 0.029825377 8/20/08 1274.54 0.00617813 -0.0061781 0.000183489 0.456091707 0.029825377 8/21/08 1277.72 0.00249191 -0.0024919 0.000169724 0.191276358 0.029825377 8/22/08 1292.2 0.01126895 -0.011269 0.000154106 0.90776447 0.029825377 8/25/08 1266.84 -0.0198206 0.01982058 0.000152372 -1.60569586 0.029825377 8/26/08 1271.51 0.00367956 -0.0036796 0.000177876 0.275890826 0.029820769 8/27/08 1281.66 0.00795094 -0.0079509 0.000162175 0.624347875 0.029820769 8/28/08 1300.68 0.01473109 -0.0147311 0.000153129 1.19043769 0.029820769 8/29/08 1282.83 -0.0138186 0.01381863 0.000160656 -1.090224639 0.029820769 Date GARCH HS NormalDistribution 0.029474021 0.028176638 0.030076256 0.028613282 0.027928486 0.029396662 0.032774376 0.031576965 0.031139579 0.0303617 0.029995653 0.033930343 0.033439254 0.031779984 0.030213925 0.030404843 0.029068435 0.032650306 0.031186793 0.032760898 0.035541602 0.035927419 0.035515916 0.03399679 0.032990553 0.037745965 0.03593702 0.036687382 0.039008043 0.0373988 0.036644619 0.034876897 0.033389261 0.031875322 0.032336623 0.031512259 0.030307198 0.028879191 0.028716252 0.031026534 0.029625563 0.028787432 0.029486528 t-Student 0.031570814 0.030181135 0.032215893 0.030648842 0.029915329 0.031487952 0.035105958 0.033823362 0.033354861 0.032521643 0.032129556 0.036344161 0.035818136 0.034040825 0.032363356 0.032567856 0.031136375 0.034973062 0.033405433 0.035091521 0.038070045 0.038483309 0.038042532 0.036415335 0.035337514 0.040431228 0.038493594 0.039297337 0.04178309 0.040059365 0.039251532 0.037358053 0.035764586 0.034142945 0.034637063 0.033754054 0.032463264 0.030933668 0.030759138 0.033233774 0.031733137 0.030835381 0.031584212

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