As a portfolio manager for Bank of America Merrill Lynch, you are managing a portfolio of $33.90 million. You would like to estimate how much your portfolio might be losing over the period of next 81 trading days. Suppose the portfolio has a daily volatility of 3.0%. a. What is 81 day volatility? b. What is the VaR (in dollars) over a 81 day time period at a 95% confidence level? c. What is the VaR (in dollars) over a 81 day time period at a 99% confidence level?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
As a
a. What is 81 day volatility?
b. What is the VaR (in dollars) over a 81 day time period at a 95% confidence level?
c. What is the VaR (in dollars) over a 81 day time period at a 99% confidence level?
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