Explanation:

From the lognormal derivation,

\alpha \text{VaR} = P_{t-1} - P^* = P_{t-1}(1 - \exp[\mu_R - \sigma_R Z_\alpha])

Applying the formula in the question we have:

95\% \text{ VaR} = 1 - \exp(0.079 - 0.312 \times 1.645) = 0.3522

99\% \text{ VaR} = 1 - \exp(0.079 - 0.312 \times 2.326) = 0.4762

Q.2819 Let’quuo assumes that the geometric returns $R_t$ are normally distributed with a 0.079 mean and 0.312 standard deviations. Further assumption is that the portfolio is currently worth 1 unit. Calculate the 95% and 99% lognormal VaR.

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UAnonymous

Last updated: July 5, 2026 at 07:08

The 95% VaR is 0.8951 and the 99% VaR is 0.2351.

The 95% VaR is 0.88526 and the 99% VaR is 0.56898.

The 95% VaR is 0.3522 and the 99% VaR is 0.4762.

The 95% VaR is 0.8951 and the 99% VaR is 0.56898.

Financial Risk Manager Part 2