Suppose you have 3 assets with N-day arithmetic returns that obey a multivariate normal distribution rN N30;
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Question:
Suppose you have 3 assets with N-day arithmetic returns that obey a multivariate normal distribution rN N30; N where N = ErNrT N = 24 N2 1 N1212 N1313 N1212 N22 N2323 N1313 N2323 N32 35 where 1 = 0:03, 2 = 0:015, 3 = 0:022, 12 = 13 = 0:5 and 23 = 0. You hold a portfolio consisting of $15 million in asset 1, $3 million in asset 2 and $7 million in asset 3. (a) Compute the 10-day = 0:95 VaR separately for each of the 3 individual assets. (b) Compute the 10-day = 0:95 portfolio VaR. How does it compare to the sum of the individual asset VaR values computed above?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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