Explanation

To convert VaR from one time horizon to another under normal conditions, we use the square root of time rule:

$\text{VaR}_{\text{new}} = \text{VaR}_{\text{original}} \times \sqrt{\frac{\text{new horizon}}{\text{original horizon}}}$

Given:

• Original VaR = $2.5 million
• Original horizon = 2 days
• New horizon = 10 days

$\text{VaR}_{10\text{-day}} = 2.5 \times \sqrt{\frac{10}{2}} = 2.5 \times \sqrt{5} = 2.5 \times 2.236 = 5.59\text{ million}$

Therefore, the appropriate translation of the two-day VaR to a ten-day horizon is $5.590 million.

Note: This calculation assumes normal market conditions and that returns are normally distributed and independent over time.