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Hi John,
In the answer of part b for this question, it stated:”This means that at the 95% confidence level, the interest rate will be 2.1% above or below current LIBOR”. I wonder where did this 2.1% came from? The standard deviation for 6 months is 1.061% and at 95% confidence, value at risk should be 1.061 * 1.645 = 1.75% above or below the LIBOR rate… Dont know where did the 2.1% come from?
Thank you
I assume you are referring to the BPP answer. I don’t know where they get 2.1% from – it does not appear in the examiners own answer 🙂
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