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Consider the portfolio of two securities Security A B Position 250,000 150,000 Annual SD of returns 0.19 0.10 Assume that the securities have correlation of
Consider the portfolio of two securities Security A B Position 250,000 150,000 Annual SD of returns 0.19 0.10 Assume that the securities have correlation of -0.5 a) Calculate the 1-year 95% VaR (Value at Risk) of the portfolio consisting of the 2 securities b) Calculate the 1-year 95% Expected Shortfall of the portfolio consisting of the 2 securities a. What is the difference between expected shortfall and VaR? What is the theoretical advantage Expected Shortfall over Var? c) Calculate the marginal VaR of the positions in the portfolio. Interpret these numbers. Confidence 95% VAR 1.645 MaxVAR 1.960
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