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[ How to predict market risk? ] J . P . Morgan proposes a simple statistical model to predict downside market risk for financial instruments
How to predict market risk? JP Morgan proposes a simple statistical model to predict downside market risk for financial instruments stock index, foreign exchange, portfolio Suppose is the percentage change of a foreign exchange rate from time to time Then the JP Morgan RiskMetrics model is where is the mean of predicted using the information available at time and is the variance of predicted using the information available at time The value at risk VaR at the level for is defined as the value which is predicted at time such that Now suppose that is the percentage of Japanese Yen per dollar from time to time We assume that and Please find the value at risk at the level for Suppose a manager is conservative so he would like to have a VaR at the level smaller than Is the VaR at this new level larger or smaller than the VaR at the level? Explain. Suppose the Japanese yen becomes more volatile so that the conditional vari ance becomes larger. How will the VaR at the level will change? Explain.
How to predict market risk? JP Morgan proposes a simple statistical model
to predict downside market risk for financial instruments stock index, foreign
exchange, portfolio Suppose is the percentage change of a foreign exchange
rate from time to time Then the JP Morgan RiskMetrics model is
where is the mean of predicted using the information available at time
and is the variance of predicted using the information available at time
The value at risk VaR at the level for is defined as the value which is
predicted at time such that
Now suppose that is the percentage of Japanese Yen per dollar from time
to time We assume that and
Please find the value at risk at the level for
Suppose a manager is conservative so he would like to have a VaR at the level
smaller than Is the VaR at this new level larger or smaller than the VaR
at the level? Explain.
Suppose the Japanese yen becomes more volatile so that the conditional vari
ance becomes larger. How will the VaR at the level will change? Explain.
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