Exercise 3.18 Let Xi, i = 1, 2, denote the annual rate of return of security i,
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Exercise 3.18 Let Xi, i = 1, 2, denote the annual rate of return of security i, and suppose that (X1,X2) follows the bivariate normal distribution with means μ1 = 0.1, μ2 = 0.15, variances σ1 = 0.12, σ2 = 0.18, and correlation coefficient ρ = −0.4. Calculate the 95% VaR for 5 days of the portfolio R =
0.4X1 + 0.6X2, where the current market value of the portfolio is $1 million
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Stochastic Processes With Applications To Finance
ISBN: 9781439884829
2nd Edition
Authors: Masaaki Kijima
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