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Suppose that the standard deviation of daily returns for a stock in the past quarter is 1.9 percent, and that the expected daily return of
Suppose that the standard deviation of daily returns for a stock in the past quarter is 1.9 percent, and that the expected daily return of the stock is 0.01 percent. Using a 99 percent confidence interval, if the daily returns are normally distributed, the lower boundary is approximately 2.576 standard deviations away from the expected outcome. Using the value-at-risk method, the maximum percentage one-day loss based on a 99 percent confidence level is: -5.275 percent -5.031 percent -4.884 percent -4.347 percent Suppose an investor has $17 million invested in that stock. The maximum one-day loss is estimated to be: $763,858 $830,280 $871,794 $921,611
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