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2. (30 Points) Consider following histogram of daily returns of stock ABC. a. Value At Risk: Calculate the VAR with % 95 confidence interval manually
2. (30 Points) Consider following histogram of daily returns of stock ABC. a. Value At Risk: Calculate the VAR with \% 95 confidence interval manually from histogram. Then do it assuming that it is normally distributed. At last compare the both results. Are they equal? Why or why not? b. What is the probabability of 5% loss in ABC stock, assuming that it is returns are normally distributed? c. Random Walk Hypothesis: In its simplest form, the random walk model suggests that returns of a stock should have a mean value zero. Check whether random walk hypothesis holds for ABC or not with 95% confidence interval. 2. (30 Points) Consider following histogram of daily returns of stock ABC. a. Value At Risk: Calculate the VAR with \% 95 confidence interval manually from histogram. Then do it assuming that it is normally distributed. At last compare the both results. Are they equal? Why or why not? b. What is the probabability of 5% loss in ABC stock, assuming that it is returns are normally distributed? c. Random Walk Hypothesis: In its simplest form, the random walk model suggests that returns of a stock should have a mean value zero. Check whether random walk hypothesis holds for ABC or not with 95% confidence interval
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