In: Finance
Suppose that the one-day VaR with a confidence level of 95% is 1.5 million. Using the assumption that the distribution of portfolio value changes is normal with mean zero, the one-day 99% VaR, the 10-day VaR and the 250- day VaR
Z value for 95% is 1.65
Z value for 99% is 2.33
one-day 99% VaR=1.5/1.65*2.33=2.11818 million
10-day 99% VaR=2.11818*sqrt(10)=6.69827 million
250-day 99% VaR=2.11818*sqrt(250)=33.49137 million