In: Finance
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?
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.