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Basic Question 12 of 19

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?

A. $2.05 million
B. $23 million
C. $17 million
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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?
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Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh

Craig Baugh

Learning Outcome Statements

explain the use of value at risk (VaR) in measuring portfolio risk;

compare the parametric (variance -covariance), historical simulation, and Monte Carlo simulation methods for estimating VaR;

estimate and interpret VaR under the parametric, historical simulation, and Monte Carlo simulation methods;

describe advantages and limitations of VaR;

describe extensions of VaR;

CFA® 2025 Level II Curriculum, Volume 5, Module 41.