Question

In: Finance

.p2(2) VaR (Value at Risk) is defined as ///////////////////////////////////// In words: The maximum loss over a...

.p2(2)

VaR (Value at Risk) is defined as

/////////////////////////////////////

In words: The maximum loss over a predetermined period with a confidence interval.

formula : VaR=position * z * sigma

where position : the value of your portfolio

z : depends on the confidence interval

=norm.inv(0.01,0,1)=-2.326347874 # for 99%

=norm.inv(0.05,0,1)=-1.644853627 # for 95%

sigma : the period standard deviation

Assume that we have 100 shares of IBM stocks, 200 shares of

Wal-Mart and 300 shares of Citi Group (ticker is C). What is the

VaR of our portfolio within next 10 days with a confidence

interval of 99%?

Expert Solution

Answer )

Data of Said shares IBM ,WAL-MArt and Citi group for return is takenfrom yahoo finance, fromlast ten days of trading till today (7th May 2018)

Price of the shares are given below used in VAR calculation

	Citigroup Inc.(c)	WTM	IBM
7-May-18	68.54	85.77	143.67
4-May-18	67.94	87.53	143.91
3-May-18	67.94	86.23	141.99
2-May-18	67.99	86.34	142.45
1-May-18	68.25	87.41	145
30-Apr-18	68.27	88.46	144.96
27-Apr-18	68.99	87.29	146.48
26-Apr-18	69.18	87.94	146.72
25-Apr-18	69.36	87.17	145.94
24-Apr-18	69.12	86.53	145.56

Calculation :

Porfolio Detail at Start Data( as on 24 Apr-18)
	$-value	weights	No of share	Price OF share
IBM	14,556	0.276741	100	145.56
WALMart	17,306	0.329024	200	86.53
Citi group	20,736	0.394236	300	69.12

Level of Certainty			0.99
Number of observations			9

Date	Prices			Returns			Portfolio	Ascend.	No of	VaR	VaR
(yyymmdd)	Asset 1	Asset 2	Asset 3	Asset 1	Asset 2	Asset 3	change	ordered	obs.	historic

24-Apr-18	145.56	86.53	69.12
25-Apr-18	145.94	87.17	69.36	0.002607206	0.00737	0.00347	0.004513	-0.21765	1	-11447.9
26-Apr-18	146.72	87.94	69.18	0.00533043	0.00879	-0.0026	0.003344	-0.08345	2	-4389.11
27-Apr-18	146.48	87.29	68.99	-0.001637108	-0.0074	-0.0028	-0.00398	-0.04223	3	-2221.3
30-Apr-18	144.96	88.46	68.27	-0.010431058	0.01331	-0.0105	-0.00264	-0.04213	4	-2216.17
1-May-18	145	87.41	68.25	0.0002759	-0.0119	-0.0003	-0.00397	-0.04075	5	-2143.51
2-May-18	142.45	86.34	67.99	-0.017742681	-0.0123	-0.0038	-0.01047	-0.04038	6	-2124.09
3-May-18	141.99	86.23	67.94	-0.003234428	-0.0013	-0.0007	-0.0016	-0.03986	7	-2096.36
4-May-18	143.91	87.53	67.94	0.013431472	0.01496	0	0.00864	-0.03757	8	-1975.97
7-May-18	143.67	85.77	68.54	-0.001669101	-0.0203	0.00879	-0.00368	-0.03497	9	-1839.29

Assets	Value	Std. Dev.	VaR	Abs. VaR
	of asset

1	14,556	0.8918%	302	302
2	17,306	1.2687%	511	511
3	20,736	0.5256%	254	254

FInally Summary

Level of Certain. =		0.99
Normal dist. Value		2.326

Worse Case VaR =		1,066
Div. VaR =		697

jeff jeffy answered 1 year ago

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