
Explanation:
The historical simulation VaR for 5% is the fifth lowest return, which is −1.59%; therefore, the correct VaR is: −79,500 = (−0.0159) × (5,000,000)
(Book 1, Module 1.1, LO 1.b)
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Question 18
A portfolio manager of an endowment wants to calculate a daily VaR for the portfolio. The €5,000,000 portfolio is restricted from using derivative securities. The manager uses a 5% level of significance to estimate the VaR. The manager ranked the 100 daily returns from last year, and reports the lowest eight returns to be: −0.0099, −0.0106, −0.0132, −0.0159, −0.0211, −0.0254, −0.0368, and −0.0584. Which of the following amounts is closest to the daily VaR using the historical simulation method?
A
−€66,000.
B
−€79,500.
C
−€105,500.
D
−€127,000.
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