Financial risk management

3. A portfolio has daily returns, discounted to today, that are normal with expecta- tion 0 and a standard deviation of 2%. Find the 1% 1-day VaR. Then find the 1% 30-day VaR under the assumption that the daily excess returns (a) are independent and (b) follow a first order autoregressive process with autocorrelation 0.2. (c) Repeat part (b) above but now with autocorrelation -0.2. Hence, comment on the effect of autocorrelation on VaR