with strike price $90. A graph of the distribution of annual portfolio
returns based on a Monte Carlo simulation appears below. From the
simulation, the mean and standard deviation of changes in portfolio value
over the next year are found to be –$241 and $5,835. If we use the
normal-linear VaR model to compute a 95% 1-year VaR, we would get
VaR = 1.65 * 5,835 – (–241) = $9,869. However, we would not expect
this number to be very accurate. Why not? What is the actual 95% 1-year
VaR statistic for this portfolio (data from the simulation is provided
below)?

** Subscribe** to view the full document.