Question: Why do VaR results between the historical simulation and model building approach when calculating the Value at Risk for say a 5-day 99% VaR portfolio

Why do VaR results between the historical simulation and model building approach when calculating the Value at Risk for say a 5-day 99% VaR portfolio differ between the two approaches?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Hi I just need you to help me to do a introduction about the paper you can read the whole paper simply and make a professional intro which has to be matched with the requirement. Introduction You are...

1. Discussion of the five-day 99%-Value at Risk of the portfolio using model- building approach: (Pls help me intrepret this with good explanations, thx!) 2. Discussion of the five-day 99%-Value at...

QUESTION 2 Briefly explain the historical simulation approach to compute value at risk (VaR). Two risk managers compute VaRs for the same portfolio over the same horizon at the same confidence level,...

CASE STUDY: Enterprise Risk Management at ABN AMRO Introduction Holland's leading bank, ABN AMRO and its subsidiaries operated more than 800 offices at home and another 2,600 in 75 other countries....

FIGURE 1 FIGURE 2 Hi, i have trouble attempting this question. We are required to set up two portfolios, A and B, with 400,000USD and 1M USD respectively consisting of stocks in figure 2 (only...

Consider; A high information coefficient of an active portfolio indicates that Select one: a. the managers have good access to a variety of investment opportunities. b. the managers are skillful in...

Which of the following situations represent(s) arbitrage opportunity(ies)? Select one or more: a.A Japanese bank is offering a JPY borrowing rate of 0.01% while an Australian bank is offering an AUD...

True or False: As the number of market risk factors increases and their co-movements become more complex, Monte Carlo simulations become more difficult to run. Model Building approach is frequently...

rmit.instructure.com Week 11 - Valu... Watchlist - Mar... Northstar Risk:... HP Inc. (HPQ) i... How do you cal... is the monte ca... Assessment Ta... Course Hero Course Hero Lecture 3 - Fut... On...

Hello! I need help on this question, could you please show me the calculations too. Thank you very much!!! initial Portfolio A & B are created on 16 September 2021 ( RISK MANAGEMENT ) Portfolio A...

Generally speaking, statutes-and the prosecutors, juries, and judges that enforce them-treat crimes against the person more harshly than crimes against property. The rationale is that human life is...

Assume you borrow an ARM of $120,000 for 30 years. Given initial interest rate-5%, margin-200 basis points, index rate at EOY1-6%, EOY2-4.5%, an annual rate cap -250 basis points. If the lender...

Graphs of quadratic functions of the form y=(x-h)(x-k) The x-intercepts are h and k. The equation of the line of symmetry is x = (h + k)/2 The x-coordinate of the turning point is h+k 2 line of...

A hula hoop and solid disc of equal radii are rolled, from rest and without slipping, down an incline plane. Which one will reach the bottom of the inclined plane first? Explain.

Describe two different approaches to measuring competitive advantage.

. Discuss how smaller firms can sustain a competitive advantage over their rivals.

. What is the difference between a corporate-level strategy and a business- level one?