a) An asset has recorded the following closing prices over a period of 5 days: 100 (day 1), 105 (day 2), 103 (day 3), 110 (day 4), and 120 (day 5). Calculate: (i) the net return at the end of the 5-day period (ii) the log return at the end of the 5-day period (iii) the average log return over this 5-day period (b) Suppose the distribution for the above returns follows the normal distribution with a mean value of 5, and a standard deviation of 2. Given that the 5% quantile value is -1.645, what is the 5% 10 days value-at-risk for a portfolio of a value of £100,000? (c)Explain why bootstrapping is necessary when using the historical simulation method for value-at-risk and why it is not necessary when using the Monte Carlo simulation method
(a) An asset has recorded the following closing prices over a period of 5 days: 100 (day 1), 105 (day 2), 103 (day 3), 110 (day 4), and 120 (day 5).
Calculate:
(i) the net return at the end of the 5-day period
(ii) the log return at the end of the 5-day period
(iii) the average log return over this 5-day period
(b) Suppose the distribution for the above returns follows the
Given that the 5% quantile value is -1.645, what is the 5% 10 days value-at-risk for a portfolio of a value of £100,000?
(c)Explain why bootstrapping is necessary when using the historical simulation method for value-at-risk and why it is not necessary when using the Monte Carlo simulation method
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