1.Value at risk

Consider a portfolio comprising a $3 million investment in Outlook Publishing and a $5 million investment in Russell Computing. Assume that the standard deviations of the returns for shares in these companies are 0.4 and 0.25 per cent p.a. respectively. Assume also that the correlation between the returns on the shares in these companies is 0.7. Assuming a 1 per cent chance of abnormally bad market conditions, calculate the value at risk of this portfolio. State any assumptions that you make in your calculations.