Q.3036 What would be the 95% parametric VaR of a portfolio made of two independently normally distributed stocks - A and B, with A ~ N(0.5, 1) and B ~ N(3, 15)? Assume that P = (A + B) | Financial Risk Manager Part 2 Quiz - LeetQuiz
Financial Risk Manager Part 2
Explanation:
Assuming P = A + B, then P ~ N(3.5, 16).
VaR(α%)=[−μT+σT×Zα]=[−3.5+4×1.645]=3.08
Note. The sum of two independent normally distributed random variables is normal. Its mean is the sum of the two means, and its variance is the sum of the two variances
Where σT=16=4
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Q.3036 What would be the 95% parametric VaR of a portfolio made of two independently normally distributed stocks - A and B, with A ~ N(0.5, 1) and B ~ N(3, 15)? Assume that P = (A + B)
