You are a Financial Manager CRC Company Ltd. in calculations of the risk values, your Company applies a VaR system at 99% (relative) VaR values on a daily basis. Over the last 500 trading days (two years) there have been five occasions when the VaR values have been breached. A subordinate comes to you with some serious concerns in relation to the current VaR calculations, arguing that they wrongly represent correlations in behavior occurring at times when the markets make large movements. He has carried out a set of alternative calculations of daily (relative) VaR values over the last two years, which also has five occasions when the VaR values have been breached.

Required:

Explain why the alternative daily VaR values may differ markedly from the values from the current system, but have the same number of VaR breaches.