An investor has $2,000 invested in stock A and $5,000 in stock B.The daily volatilities of A and B are 1.5% and 1% respectively and the coefficient of correlation is 0.8.What is the one day 99% VaR? (Note that N(-2.33)=0.01)
A)$177
B)$135
C)$215
D)$331

Question

Quizplus · Accepted Answer

The correct answer is A.The one day 99% VaR is given by:VaR = -2.33 * sqrt(0.015^2 + 0.01^2 + 2 * 0.015 * 0.01 * 0.8) * sqrt(2000^2 + 5000^2) = $177.

An Investor Has $2,000 Invested in Stock a and $5,000