Hello Mr John,
For this value at risk question, I wonder, why can't we simply multiply the annual standard deviation of $800,000 by 5 years to arrive at 5 years standard deviation.
I understood the calculation based on your lecturer, but is it wrong mathematically to times the annual standard deviation by 5, instead of turning it into variance first, then you convert the 5 years variance by square root the product. Hope you can understand my wording and sorry for overcomplicating things.
Thank you in advance!!
Ask the Tutor ACCA AFM
Tisa Co J12 (Value at Risk)
4mo ago#1I am afraid that it is wrong to simply multiply the std deviation by 5. It is the variance that must be multiplied by 5. (The reason becomes obvious by watching the Paper MA lectures on the standard deviation, but to be honest I would not waste your time but would just learn the rule)
4mo ago#2I am afraid that it is wrong to simply multiply the std deviation by 5. It is the variance that must be multiplied by 5. (The reason becomes obvious by watching the Paper MA lectures on the standard deviation, but to be honest I would not waste your time but would just learn the rule)
Sign into reply to this topic.