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13 Consider the following returns for a portfolio of stocks that replicates the S&P 500 index that has a current market value of £250,000: Time Day 1 Day 2 Day 3 Day 4 Day 5 Return (%) 0.1% 0.2% -0.15% 0.12% 0.08% Required Calculate the daily VAR using the historical simulation approach and an 80% confidence interval (Note: do not use the PERCENTILE function in MS Excel) Assuming a zero mean return, compute the daily VAR using the RiskMetrics approach and an 80% confidence interval and comment on the difference with the 1-day VAR based on historical simulation

13 Consider the following returns for a portfolio of stocks that replicates the S&P 500 index that has a current market value of £250,000: Time Day 1 Day 2 Day 3 Day 4 Day 5 Return (%) 0.1% 0.2% -0.15% 0.12% 0.08% Required Calculate the daily VAR using the historical simulation approach and an 80% confidence interval (Note: do not use the PERCENTILE function in MS Excel) Assuming a zero mean return, compute the daily VAR using the RiskMetrics approach and an 80% confidence interval and comment on the difference with the 1-day VAR based on historical simulation

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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13

Consider the following returns for a portfolio of stocks that replicates the S&P 500 index that has a current market value of £250,000:

Time

Day 1

Day 2

Day 3

Day 4

Day 5

Return (%)

0.1%

0.2%

-0.15%

0.12%

0.08%

Required

  1. Calculate the daily VAR using the historical simulation approach and an 80% confidence interval (Note: do not use the PERCENTILE function in MS Excel)
  2. Assuming a zero mean return, compute the daily VAR using the RiskMetrics approach and an 80% confidence interval and comment on the difference with the 1-day VAR based on historical simulation
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