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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

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
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
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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

  1. Assuming mean returns of zero, calculate the daily VAR using the RiskMetrics approach and a 95% confidence interval
  2. 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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