Value-at-Risk

Chapter 1, Page 40
Exercise 11

Using only the information provided in the example, which of the following VaR metrics could we evaluate for Leavens’ bond portfolio:

a. 95% quantile of loss;

b. variance of portfolio value;

c. standard deviation of simple return.

Solution

a. Cannot be calculated. Lacking information about the portfolio's current value, we cannot characterize its loss distribution.

b. Can be calculated.

c. Cannot be calculated Lacking information about the portfolio's current value, we cannot characterize its return distribution.