An investment fund wishes to reorganize its portfolio by changing the risk level in such a way that for a capital W $10 million and average return of 1 05 their relative value at risk is $20 million with 99 confidence Assuming the returns are normally distributed, a Find the value the portfolio var...

Step 11 a To calculate the portfolio variance we must use the formula for a portfoli ...

An investment fund wishes to reorganize its portfolio by changing the risk level in such a way

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Question:

An investment fund wishes to reorganize its portfolio by changing the risk level in such a way that for a capital W= $10 million and average return of µ=1.05 their relative value at risk is $20 million with %99 confidence. Assuming the returns are normally distributed,

a. Find the value the portfolio variance should have.

b. Using this variance calculate the absolute value at risk.