- This topic has 3 replies, 2 voices, and was last updated 11 years ago by
.
-
Posts
-
Respected sir,
i dont know how to calculate standard deviation for VaR.
If we say 99% or 95% confidence level then how can we calculate ?=2.64?
and how ?=1.645 at 98% confidence level?What you do is this:
Because the distribution is symmetrical is means that there is 50% easy side of the average.
For 95% confidence we say that there will be 50% on one side of the average and therefore 45% (95 – 50) below the average, (or 0.45)You then look in the tables to see how many standard deviations give an answer in the tables of 0.45. (You will fine that 1.64 sd’s gives and answer of 0..4495, and 1.65 sd’s gives an answer of 0.4505 – so for 0.45, we would say 1.645 sd’s )
Try doing the same yourself for 99% confidence – you should get an answer of 2.33 sd’s. (Normally we only do it for either 95% or 99%.)
I don’t know where you got 2.64 from, and 1.645 is not 98% confidence!
- You must be logged in to reply to this topic.