Coles group (COL) shares have an annual average return of 14% and an annual return standard deviation
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Question:
Coles group (COL) shares have an annual average return of 14% and an annual return standard deviation of 35%. Returns are assumed to be normally distributed. Provide the following risk measures and show your working.
- Calculate the stock's Value-at-Risk (VaR) at the 95% level over the 1-year horizon. Interpret this result.
- Recalculate and interpret a portfolio Value-at-Risk (VaR) at the 95% level over the 1year horizon if it were combined with Rio Tinto (RIO) stocks (50% weighting in each stock) where RIO has an average annual return of 18% and an annual standard deviation of 50% and the two stocks have a correlation of 0.3.
Related Book For
Value at Risk The New Benchmark for Managing Financial Risk
ISBN: 978-0071464956
3rd edition
Authors: Philippe Jorion
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