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var for one year= probability level x standard deviation for one year
var for ten years= probability level x standard deviation for one year x square root of tenmy question is if the standard deviation is not the same for each year (eg 5000 in first 5 year and 8000 in next 5 year or it has different standard deviation for each year in these 10 years), how do we calculate the var for ten years?
You would square each of them; add up the squares; then take the square root of the total.
🙂using ur method above, we would get the standard deviation for 10 years?
then var for 10 yrs = probability level x SD calculated using ur method x square root of 10am i correct?
No – it would be the probability x SD
(you do not need to multiply by the square root of 10. The only reason it was there before is that the SD per year was the same for each of the 10 years. So doing the same thing as I did above if the SD’s were equal each year…….you would square the SD’s; then you would add them up, so because they were equal the total would be 10 x SD squared; then you would take the square root, which would give you SD x square root 10.)
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