The VaR of a bank's trading portfolio has been estimated at $5,000. It is assumed that the daily earnings are independently and normally distributed. What is the 10-day VaR?

Question

Quizplus · Accepted Answer

To calculate the 10-day VaR, we need to consider the fact that the daily earnings are independent and normally distributed. The formula for the 10-day VaR is the daily VaR multiplied by the square root of 10 (since there are 10 trading days in the period). 
Therefore, 10-day VaR = $5,000 x sqrt(10) = $15,811.  So, the correct answer is (C).

The VaR of a Bank's Trading Portfolio Has Been Estimated