Question A portfolio of shares has a mean value of $10m with a daily standard deviation of $1m. To the 99% confidence level, what is the value at risk over 9 days?
Answer Std deviation over 9 days is $1m x square root of 9 = $3m The z value for the 1/49 split is 2.33 Therefore there is only a 1% chance that the value of the portfolio will be 2.33 x 3 = 7. Therefore there is a 99% chance that the value of the portfolio will be at least $3m (= 10 – 7)
The above answer $ 3m is given by you. But your test answer is $ 7.00 Which one is correct?