Calculation: VaR = |Δ| × VAR(dS) − (1/2)Γ × VAR(dS)²

Given:

• Δ = 100,000
• Γ = -50,000
• VAR(dS) = 2

VaR = 100,000 × 2 − (1/2) × (−50,000) × 2² = 200,000 − (1/2) × (−50,000) × 4 = 200,000 − (−100,000) = 200,000 + 100,000 = $300,000

The negative gamma actually reduces the VaR in this case, making the total VaR $300,000.