Explanation:
The correct answer is B.
liquidity-adjusted VaR = $62,000,000 \times \sqrt{ \frac{(1 + 4 \times 1 + 8)}{6 \times 4} } = `.
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Q.3225 Mark Sanders is a chief investment officer at Kremlin Pension Fund managing defined benefit plan for state employees. His fund manager has calculated the 1-day value at risk (VaR) of the position at $62 million. However, given the magnitude of the position it is most likely that any liquidation will take place over four trading days. In this scenario, what will be the liquidity-adjusted VaR for Kremlin?
A
$116,250,000
B
$84,897,000
C
$22,897,000
D
$54,250,000
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