A portfolio has a current value of $1000. The annual profit $X$ is distributed normally with mean 100 and standard deviation 100. What is the 99%-VaR?
A) $- 133$
B) $- 65$
C) $65$
D) $133$

Question

Quizplus · Accepted Answer

The 99%-VaR is the value at which there is a 1% chance that the portfolio will lose more than that amount. Using the normal distribution, we can find the value of X such that P(X < -133) = 0.01. Using a standard normal distribution table, we find that the z-score corresponding to a probability of 0.01 is -2.326. Therefore, the 99%-VaR is -2.326 * 100 = -232.6.

A Portfolio Has a Current Value of $1000 XXX Is Distributed Normally with Mean 100 and Standard Deviation 100

A Portfolio Has a Current Value of $1000 $X$ Is Distributed Normally with Mean 100 and Standard Deviation 100