Question
Q: MegaBank has a portfolio of $100 million invested in the Dow Jones Industrial Average Index. The regulators want a 5% 30-day VAR (Value At
Q: MegaBank has a portfolio of $100 million invested in the Dow Jones Industrial Average Index. The regulators want a 5% 30-day VAR (Value At Risk) and have recommended that the statistical analysis method be used. Over the past year, the Dow Jones Industrial Average Index has had an average daily return of 0.0526% and a daily standard deviation of 1.4589%. Assume a 253 day trading year.
a. Calculate the 30 day expected return
b. Calculate the 30 day standard deviation
c. Calculate the 5% 30-day VAR for the banks regulators (in %)
d. Calculate the 5% 30-day VAR for the banks regulators (in dollars)
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