Suppose that the daily change in the value of a portfolio is, to a good approximation, linearly
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Suppose that the daily change in the value of a portfolio is, to a good approximation, linearly dependent on two factors, calculated from a principal components analysis. The delta of a portfolio with respect to the first factor is 6 and the delta with respect to the second factor is –4. The standard deviations of the factor are 20 and 8, respectively. What is the five-day 90% VaR?
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