VAR_Revision_Tutorial

VAR_Revision_Tutorial - BUS3026W Finance II 2007 - Tutorial...

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BUS3026W Finance II 2007 - Tutorial 10 Due: Monday 7 May ______________________________________________________________ Question One Suppose a portfolio manager manages a portfolio which consists of a single asset. The return of the asset is normally distributed with a daily mean return of 0.05% and standard deviation of 1.5%. The value of the portfolio today is R100 million. 1. What is the probability of a loss of more than R20 million one year hence? [5] 2. What is the 1-month 5% VaR for the portfolio? [5] Question Two You manage a portfolio for a number of pension fund clients that is currently worth R1 million, invested in a combination of local equities and a risk-free asset. Your analysis indicates that the monthly return on the portfolio is closely approximated by a normal distribution with an expected return of 2% and a standard deviation of 11%. Your clients have indicated that they have R2 million in additional funds to
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This note was uploaded on 06/01/2011 for the course FIN 3026W taught by Professor Drtoerien during the Summer '09 term at University of Cape Town.

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