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Questions Assess the risk posed by the S&P 500. The investment committee would like to understand the level of volatility inherent in the S&P 500.
Questions Assess the risk posed by the S&P 500. The investment committee would like to understand the level of volatility inherent in the S&P 500. Value-at-risk (VaR) is useful in measuring the risk of losses on a daily (short-term) and monthly (mid-term) level. 1. Calculate the VaR for the S&P 500 as exhibited through the SPY ETF. Specifically: a. Calculate the daily (same as one-day) VaR with 95% confidence and 99% confidence. b. Calculate the monthly VaR with 99% confidence. Options: Consider the historical and parametric approaches. For the parametric approach, consider a log-normal distribution as needed. 2. Comment on the appropriateness of the SPY ETF as a single investment instrument for the ACCF
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