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Calculating the Value-at-Risk

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Please help with the following problems.

a) National Bank Asia wants to hire fresh young graduates to work in their Market Risk Management department. As you are preparing your interview, you need to understand some key questions, such as why do we use 500 days or more to evaluate the VaR in a historical simulation?

b) The bank assumes that the change in the value of its emerging markets high yield bond portfolio follows a standard normal distribution. The management is not very happy with its one-day VaR estimated at US $3,000,000 with a confidence level of 97.5%. They want more accuracy at 99% confidence level and will probably ask you to answer two questions i) what is the one-day 99% VaR? ii) Therefore, determine the ten-day 99% VaR.

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The following posting helps calculate the value-at-risk.

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Hi,

We use 500 days or more to evaluate VaR in historical simulation because it provides us with 500 alternative scenarios for what can happen between today and tomorrow. Each scenario dollar ...

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  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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