Question

In: Finance

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?

Solutions

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.


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