Consider a Single Asset Portfolio TAS:

Assumption:

CHF 10'000'000 Shares of TAS

N = 10 (short fall or loss period)

X = 99 (1% level of significance)

Assume 252 days of trading per year, volatility of 2% per day

Analyse data and assess VaR

Consider a second Single Asset Portfolio IMD:

Consider a position of CHF 5 Million on IMD

Daily volatility is 1% (approx. 16% per year) hence standard deviation of the change in Portfolio in 1- day is CHF 50'000 (1% of 5 million)

Analyse and assess 10 day VaR at 99% Confidence Level

Now consider a 2 Asset case Portfolio (TAS and IMD) :

Correlation between the 2 returns is 0.3 (ignore weights)

Use info from above

Analyse data and assess 10 day VaR at 1% level of significance

Question :

Compute in monetary terms the benefits of Portfolio diversification