The current market portfolio of an investment bank has a current value of $100 million and a daily standard deviation of 1%. In the last year (250 trading days), the ten worst losses have been $3,500,000, $3,200,000, $2,900,000, $2,500,000, $2,300,000, $2,200,000, $1,900,000, $1,800,000, $1,600,000, $1,400,000.

1. Calculate the 99% daily Value-at-Risk using the delta-normal approach.

(6 marks)

2. Calculate the 99% daily Value-at-Risk using the historical simulation approach.