A portfolio of derivative securities on the S&P 500 Index has a delta of =100, and the
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Question:
A portfolio of derivative securities on the S&P 500 Index has a delta of =100, and the current value of the Index is S=3405. The historical monthly returns R on the index are approximately normal, R~N(,2), with = 0.01, =0.04, but you have also observed a non-zero skewness, = - 0.10. Using Cornish-Fisher, evaluate the 1-year VaR0.99 of the portfolio. For the standard normal, z0.99 = 2.32 and z0.01 = - 2.32. Assume that monthly returns are uncorrelated. Note that the mean annual return is 0.12.
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