VaR

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

VaR

Postby AMITAG1990 » Mon Nov 12, 2012 6:02 pm

Under which of the following condition VaR always increases.?

A) When the level of confidance decreases
B) When the mean of thhe return distribution is greater than 0.

Ans is neither of them..
But In my understanding, A should be true... Please comment on this..

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content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: VaR

Postby content.pristine » Thu Nov 15, 2012 8:44 pm

Let's say for your portfolio, VaR at 99% confidence is $100 Million, and your VaR at 95% confidence is $60 Million. That means, when you decrease the confidence, the VaR also decreases..

Hope this helps!
8-)

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

Re: VaR

Postby AMITAG1990 » Thu Nov 15, 2012 9:03 pm

Yes i am also telling same.. But in GARP practice paper they have given none of them.. Some times these error creates a wrong understanding..

balajismz
Finance Junkie
Posts: 63
Joined: Mon Nov 05, 2012 9:13 am

Re: VaR

Postby balajismz » Thu Nov 15, 2012 9:26 pm

Yes, the answer should be none of them because they are asking the case when the Var increases

and in the option u have confidence level decreases

Remember Var%=Z* sigma

Z value increases with confidence level...so more confidence level implies more Z value implies more Var

Balaji

content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: VaR

Postby content.pristine » Fri Nov 16, 2012 2:26 pm

My point is that both are wrong..

8-)


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