Explanation:
VaR 10 days = VaR 1 day × √10
VaR 1 day = portfolio value × z-value × daily volatility
Daily volatility = 0.27 / √252 = 0.017 (i.e., 1.7%)
VaR 1 day = $2.35 million × 2.33 × 0.0170 = $93,084
VaR 10 days = $93,084 × √10 = $294,145
(Book 4, Module 48.2, LO 48.f)
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Question 69
An asset manager is managing a portfolio with a current market value of $2.35 million and an annualized volatility of 27%. What is the 99% VaR, assuming normally distributed returns, 252 business days per year, and a 10-day holding period?
A
$264,145.
B
$284,145.
C
$294,145.
D
$304,145.
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