CMA Final · Strategic Financial Management · Risks in Financial Market
A portfolio of Rs 10 crore has a daily standard deviation of returns of 1.2%. Assuming normally distributed returns and a z-value of 2.33 for 99% confidence, the one-day Value at Risk is closest to:
One-day 99% VaR is about Rs 27.96 lakh. One standard deviation of daily loss is 1.2% of Rs 10 crore, which is Rs 12 lakh, and multiplying by 2.33 for 99% confidence gives Rs 27.96 lakh.
- ARs 27.96 lakhCorrect
- BRs 12.00 lakh
- CRs 2.80 lakh
- DRs 88.4 lakh
Explanation
VaR = 2.33 x 1.2% x Rs 10 crore = 2.33 x Rs 12 lakh = Rs 27.96 lakh. Rs 12 lakh ignores the z-value; Rs 2.80 lakh is a decimal-place slip.
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