Query on historical simulation

sushant.panda
Posts: 1
Joined: Tue May 13, 2014 9:22 pm

Query on historical simulation

Postby sushant.panda » Wed May 14, 2014 7:53 am

Rational investment Inc. is estimating a daily VaR for its fixed income portfolio currently valued at USD 800 million. Using returns for the last 400 days (ordered in decreasing order, from highest daily return to lowest daily return), the daily returns are the following: 1.99%, 1.89%, 1.88%, 1.87%, …., -1.76%, -1.82%, -1.84%, -1.87%, -1.91%.
At the 99% confidence level, what is your estimate of the daily dollar VaR using the historical simulation method?
a. USD 14.08mm
b. USD 14.56mm
c. USD 14.72mm
d. USD 15.04mm

How to solve this kind of sums?
Are we suppose to use alpha*n or alpha*n+1
Garp uses alpha*n and Pristine ppt shows calculation using alpha*n+1

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Query on historical simulation

Postby edupristine » Fri May 16, 2014 12:56 pm

VaR = 1.82%*800 = 14.56 million


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