An investor holds a portfolio consisting of 100 shares of stock S. Let S and S+...

 

Transcribed Image Text:

An investor holds a portfolio consisting of 100 shares of stock S. Let S and S+ be the stock prices at times t and t + 1 respectively. The time horizon is 1 day. The stock price today (we are at t) is S25. The risk factor changes are denoted by Xt+1 log St1-log S. Assume that for the next 10 days (periods) the risk factor changes are independent and identically normally distributed with mean 0 and variance 0.01, and independent across stocks. Calculate the VaR 0.9 (10-day value at risk) for the linearised loss. 10 An investor holds a portfolio consisting of 100 shares of stock S. Let S and S+ be the stock prices at times t and t + 1 respectively. The time horizon is 1 day. The stock price today (we are at t) is S25. The risk factor changes are denoted by Xt+1 log St1-log S. Assume that for the next 10 days (periods) the risk factor changes are independent and identically normally distributed with mean 0 and variance 0.01, and independent across stocks. Calculate the VaR 0.9 (10-day value at risk) for the linearised loss. 10

Answer rating: 100% (QA)

The question asks us to calculate the 10day Value at Risk VaR for linearized loss of a portfolio con... View the full answer