Portfolio consisting in two market indices

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Reference no: EM132073234

A portfolio manager is computing the VaR of a portfolio consisting in two market indices. On an annual basis, the expected return on the first index is 14.59% and the standard deviation is 14.51%. The second index has an expected annual return of 15.58%, and a standard deviation of 23.35%. The correlation between the annual returns of the two indices is 0.71. The market value of the first index is $7 million, and the market value of the second index is $3 million. Based on the variance-covariance method, compute:

• the 5% annual and daily VaR

• the 1% annual and daily VaR

Reference no: EM132073234

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