Consider a portfolio that is comprised of two stocks A and B. The position in stock A is valued at 70,000 and has daily standard deviation of returns of 1%. The stock B position is valued at 250,000 and has daily standard deviation of returns of 2.5%. Returns in stock A and B are normally distributed and have correlation -0.6.

1. Calculate the 10-day 95% VaR of stock A
2. Calculate the 10-day 95% ES of stock A
3. Calculate the 10-day 95% VaR of the portfolio. By how much does diversification reduce the VaR
4. Calculate the marginal VaR of each position

Confidence 95% 97.5% 99% APPENDIX VAR 1.645 1.960 2.326 Max VAR 1.960 2.241 2.576