Explanation

Calculation of 5% Daily VaR:

Given:

• Portfolio value = $900 million
• Daily expected return (μ) = 0.0298% = 0.000298
• Daily standard deviation (σ) = 0.9367% = 0.009367
• Confidence level = 95% (5% VaR)
• Z-score for 5% VaR = 1.65

VaR Formula: $\text{VaR} = \text{Portfolio Value} \times (\mu - z \times \sigma)$

Calculation: $\text{VaR} = 900,000,000 \times (0.000298 - 1.65 \times 0.009367)$ $\text{VaR} = 900,000,000 \times (0.000298 - 0.01545555)$ $\text{VaR} = 900,000,000 \times (-0.01515755)$ $\text{VaR} = -13,641,795$

Result: The 5% daily VaR is approximately $13.6 million.

Note: The negative sign indicates a loss, but VaR is typically reported as a positive dollar amount representing the potential loss.