Explanation:
To calculate the VaR at the 90% confidence level using the given dataset, we first order the dataset VaR in the ordered dataset:
The worst 10 return observations are: [-20, -18, -18, -17, -15, -14, -12, -10, -7, -3]
Total number of observations: 30
Position = $0.10 \times 30 + 1 = 3 + 1 = 4$th observation
The 4th worst return in the ordered list is:
-20, -18, -18, -17, -15, -14, -12, -10, -7, -3
Therefore, the VaR at the 90% confidence level is -17%. This means that, with 90% confidence, the maximum expected loss will not exceed 17% over the specified time horizon.
Q.2822 There are 30 observations in a dataset. The worst 10 return observations (in %) are listed below:
[-20, -18, -18, -17, -15, -14, -12, -10, -7, -3]
What is the VaR at the 90% confidence?
A
17%
B
18%
C
16%
D
15%
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