Question 2.

You are given a portfolio of three assets whose returns are jointly normally distributed with the following mean vector and covariance matrix:

0.20 0.08 0.02 0.02

0.10 0.02 0.06 0.03

0.15 0.02 0.03 0.07

a. Compute the 95% VaR for the portfolio if we invest $1 in the first asset, $2 in the second asset, and $3 in the third asset.

b. How much does each assets holding contribute to the overall VaR risk?