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Postby madhuri1682 » Sat Nov 03, 2012 12:36 pm

The Westover Fund is a portfolio consisting of 42% fixed-income investments and 58% equity investments. The manager of the Westover Fund recently estimated that the annual VAR (5%), assuming a 250-day year, for the entire portfolio was $1,367,000 based on the portfolio's market value of $12,428,000 and a correlation coefficient between stocks and bonds of zero.
If the annual loss in the equity position is only expected to exceed $1,153,000; 5% of the time, then the daily expected loss in the bond position that will be exceeded 5% of the time is closest to:
Choose one answer.
a. $72 623
b. $46,445.
c. $21,163.
d. $55,171.

please help me calculate this

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Re: VaR

Postby AMITAG1990 » Sat Nov 03, 2012 7:18 pm

hi madhuri,
here formula is,
Var(p)^2 = Var1^2 + Var2^2 + 2Var1*Var2*corr
As here corr is 0 and By putting value we can get VaR1 hence then divide it by squt250 to get the daily Var and ans is 46445.

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Re: VaR

Postby content.pristine » Tue Nov 06, 2012 1:35 pm

Perfect answer Amit!
Check out this post:


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