Calculate the VAR for the following situations:
a. Use the analytical method and determine the VAR at a probability of 0.05 for a portfolio in which the standard deviation of annual returns is $2.5 million. Assume an expected return of $0.0.
b. Use the historical method and the following information for the last 120 days of returns to calculate an approximate VAR for a portfolio of $20 million using a probability of 0.05:
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Less than -0%
|
5
|
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-10% to -5%
|
18
|
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-5% to 0%
|
42
|
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0% to 5%
|
36
|
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5% to 10%
|
15
|
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Greater than 10%
|
4
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