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You own 20,000 shares of PDQ Corp. The average one-day changes in the price of a share is +$0.15 per share. The standard deviation
You own 20,000 shares of PDQ Corp. The average one-day changes in the price of a share is +$0.15 per share. The standard deviation of one-day changes in the price of a share is $0.45 per share. You own 10,000 shares of QPD Corp. The average one-day changes in the price of a share is -$0.02 per share. The standard deviation of one-day changes in the price of a share is $0.33 per share. The correlation coefficient p between the one-day price change of the two stocks is +0.70. What is the one-day VaR of this portfolio? Choose your own confidence level. Confidence: a. Use the standard normal distribution of price/value changes. Z confidence ==NORM.S.INV(confidence level in decimals) note: the variance of the portfolio is given by 0% Portfolio = (Q Ap) + (Q ) + 2 [Q Q] b. Use the t-distribution with 5 degrees of freedom for price/value changes. t confidence ==TINV(confidence level in decimals, degrees of freedom) note: the variance of the portfolio is given by 0% Portfolio = (Q Ap) + (Q Ap ) + 2 [Q1 Q Ap]
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