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Consider a position consisting of a R120 000 investment in assets A and a R120 000 investment in asset B

Consider a position consisting of a R120 000 investment in assets A and a R120 000 investment in asset B. Assume that the daily volatilities of both assets are 1% and that the coefficient of correlation between their Returns is 0.4. What are the five day 95 % VAR and ES for the portfolio

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Expert Solution

the five days 95% value at risk is 1.645 *4156.917 = 6838.128

The 5-day 95% ES is from equation

4156.917* [(e-1.645 2/2) / (sq root of 2pi * 0.01) ]

= 4277.467

jeff jeffy answered 2 years ago
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