A banker manages a 1 million stock portfolio with a 1-day volatility of 0.2 and 1-day mean return of 0. The banker calculated a Value of Risk of 0.4653, but forgot whether he/she calculated the Value at Risk for a 90 precent, 95 percent, 99 percent, or 99.5 percent confidence interval. 

Calculate based on the information provided the correct confidence interval. 

Give the confidence interval with two digits after the decimal point (e.g. 0.90). 2. Consider the following series of US Dollar - Thai Baht (USD/THB) exchange rates. Suppose a currency trader uses a 1-day momentum trading strategy. Day Date USD/THB 1Feb 24, 2022 32.63 2Feb 25, 2022 32.45 3Feb 28, 2022 32.07 4Mar 01, 2022 32.96

Calculate the log returns for day 2,3,4 (include your calculation) and give the positions of the currency trader (long or short) for day 3 and 4. Include your calculations and give a short explanation of your answer?

Suppose that the exchange rate follows a Brownian motion. Explain the implications for the long-term expected returns of the 1-day momentum trading strategy?

Answer rating: 100% (QA)

Confidence Interval Calculation Based on the given information the banker calculated a Value at Risk VaR of 04653 but forgot the confidence interval for which the VaR was calculated VaR is a measure o... View the full answer