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Sir i do not understand part b VAR calculation and it is different to the method in Tisa co 6/12.
please explain may be i am not being able to find out the difference between two?They have both been done the same way!
(Tisa is the better question because it was set by the current examiner).
You will have to be more specific about what your problem is because I cannot simply type out the whole answer to two questions.
I am guessing that your problem is calculating the six-month standard deviation (in the case of Katmai) and the five-year standard deviation (in the case of Tisa), when in both cases we are given the annual standard deviation.
If so, you should watch the lecture on VaR where I explain how to do this:
In Tisa co they have not multiplied with annual cash flow whereas in katamai they have multiplied with annual cashflow ?
thank youThey have multiplied by the annual flow when they wanted the annual VaR. When they want the 5 year VaR they multiply by the 5 year cash flow.
Sir in tisa co annual standard deviation is 800,000 and this is with which they have have multiplied it whereas annual cash flow is 2200,000 .
whereas in katamai volatility is 150 basis point and cash flow is $150m.
is it because in katamai standard deviation is given in terms of basis points so we have to multiply it with cash flow as well?
and again in blipton 12/08 only standard deviation is used and not the cash flowFor Katmai – yes, that is the reason.
With regard to Blipton, I can’t help you because I only have the original exam question and in the original question there was no mention of value at risk. (Your book has obviously amended it for some reason, which is annoying because it was a perfectly good question as it was in the exam!!!)
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