Assume that over short periods of time, the stock price is approximately normally distributed with mean return of 10% per year and annual standard deviation of 30%.

What would be the one-week, 5% VaR on the stock? Express your answer as a percentage loss on the stock position. (A loss should be expressed as a negative number, for example, a loss of 3.1% would be reported as -3.1.)

What would be the one-day 5% VaR on the stock? Express your answer as a percentage loss on the stock position. There are 250 trading days in a year. (A loss should be expressed as a negative number, for example, a loss of 2.1% would be reported as -2.1.)

Answer rating: 100% (QA)

To calculate the Value at Risk VaR for both oneweek and oneday periods we can use the normal distrib... View the full answer