Suppose we estimate the one-day 95% VaR from 1,200 observations as 6 (in millions of dollars)....

Suppose we estimate the one-day 95% VaR from 1,200 observations as 6 (in millions of
dollars). By fitting a standard distribution to the observations, the probability density
function of the loss distribution at the 95% point is estimated to be 0.02. What is the
standard error of the VaR estimate?

Expert Solution

Calculation Of VAR (value at risk)

FORMULA for standard error
ER= 1 * √q(1-q)
F(X) n

X	0.02
q	0.05
1-q	0.95
n	1200

Applying above formula we get the value of STANDARD ERROR OF ESTIMATE $0.31 MIllions

workings for which has been explained in the excel snapshot kindly zoom and see for clear figures

50*0.006291529=0.31Million.

jeff jeffy answered 3 years ago

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