Value at risk safe bank calculates value at risk

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Reference no: EM131978435

Value at Risk Safe Bank (SB) calculates “Value at Risk” at 90% confidence level monthly. SB estimates mean and standard deviation of monthly returns on its portfolio to be 2% and 6%, respectively. Current portfolio value is $150 million If returns are normally distributed, what currently is the VAR of SB? Suppose you were recently hired as an assistant to the portfolio manager at SB. Having collected past data on returns of the securities comprising current portfolio of Safe Bank, you noticed that 5% of monthly returns on the portfolio in your sample fall below -10%. Is this observation consistent with information given in the problem? What implications (if any) does your discovery have for the value of the VaR? Explain

Reference no: EM131978435

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