- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 41. Measuring and Managing Market Risk
- Subject 1. Value at Risk
CFA Practice Question
Assume there are 250 trading days in a year. The annual expected return is 10% and the standard deviation is 20%. What is the daily 5% parametric VaR for a $100 million portfolio?
B. $23 million
C. $17 million
A. $2.05 million
B. $23 million
C. $17 million
Correct Answer: A
Daily standard deviation: 0.2/2501/2 = 0.012649
[(E(Rp) - 1.65 σ p) (-1)] 100 million = [(0.0004 - 1.65 x 0.012649) (-1)] 100 million = $2.047 million
Daily expected return: 0.1/250 = 0.0004
Daily standard deviation: 0.2/2501/2 = 0.012649
[(E(Rp) - 1.65 σ p) (-1)] 100 million = [(0.0004 - 1.65 x 0.012649) (-1)] 100 million = $2.047 million
User Contributed Comments 1
| User | Comment |
|---|---|
| davidt87 | anyone know why they are finding the square root of the standard deviation? did they mistakenly think the question gave us variance? |