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Unformatted text preview: distribution with a 99% confidence level=2.325) 1-day 99% VaR=211,000*2.325=490,500 10-day 99% VaR=490,500*sqrt(10)=1,551,100 c) Please calculate the 10-day 99% VaR for only the Apple shares and calculate the 10-day 99% VaR for only the Yahoo shares. (Hint: The inverse of a normal distribution with a 99% confidence level=2.325) Apple 1-day 99% VaR=100,000*2.325=232,500 10-day 99% VaR=232,500*sqrt(10)=735,000 Yahoo 1-day 99% VaR=150,000*2.325=348,700 10-day 99% VaR=348,700*sqrt(10)=1,102,700 d) Using your answers to part b and c, please show if there are any benefits from diversification in terms of VaR. (735,000+1,102,700)- 1,551,100=286,600 is the reduction in VaR therefore benefit from diversification....
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This note was uploaded on 10/16/2011 for the course FIN 353 taught by Professor Cobus during the Spring '08 term at S.F. State.
- Spring '08