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 Assuming mean returns of zero, calculate the daily VAR using the RiskMetrics approach and a 95% confidence interval Assuming that returns are independently and identically distributed, compute the weekly VAR and comment on the difference with the 1-day VAR
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 Assuming mean returns of zero, calculate the daily VAR using the RiskMetrics approach and a 95% confidence interval Assuming that returns are independently and identically distributed, compute the weekly VAR and comment on the difference with the 1-day VAR
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
Problem 1PS
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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
- Assuming mean returns of zero, calculate the daily VAR using the RiskMetrics approach and a 95% confidence interval
- Assuming that returns are independently and identically distributed, compute the weekly VAR and comment on the difference with the 1-day VAR
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