Question
You are the manager of a distressed fund with a position in the AntiCovid Company. You hold 100,000 shares in this illiquid stock, which has
You are the manager of a distressed fund with a position in the AntiCovid Company. You hold 100,000 shares in this illiquid stock, which has a current price of $78.00 per share. The volatility of the stock is 40% per annum. The spread is not constant: it has a mean of 2.0% with a volatility of 1.0%. You assume the daily expected return of the stock is zero such that absolute and relative Value-at-Risk (VaR) give the same result. If you assume 250 trading days per year, which is nearest to the one-day 95.0% Liquidity-adjusted stressed VaR? $466,722
$324,573
$2,030
$5,274,093
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