Financial Risk Manager Part 2
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The annual mean and volatility of a portfolio are 10% and 40%, respectively. The current value of the portfolio is GBP 1,000,000. How does the 1-year 95% VaR that is calculated using a normal distribution assumption (normal VaR) compare with the 1-year 95% VaR that is calculated using the lognormal distribution assumption (lognormal VaR)?
A
Lognormal VaR is greater than normal VaR by GBP 130,400
B
Lognormal VaR is greater than normal VaR by GBP 17,590
C
Lognormal VaR is less than normal VaR by GBP 130,400
D
Lognormal VaR is less than normal VaR by GBP 17,590