6. Risk Management

Value At Risk — Quiz

Test your understanding of value at risk with 5 practice questions.

Practice Questions

Question 1

If the 1-day 95\% VaR of a portfolio is \50{,}000, what is the 10-day 95\% parametric VaR under the square-root-of-time rule?

Question 2

A portfolio valued at \2{,}000{,}000 has an expected daily return of 0.1\% and a daily standard deviation of 1.2\%. What is the 97.5\% 1-day parametric VaR? (Assume Z-score = 1.96)

Question 3

Using historical simulation with these 10 one-day returns: -6\%, -5\%, -4\%, -3\%, -2\%, -1\%, 0\%, 1\%, 2\%, 3\%, what is the 90\% 1-day VaR for a \200{,}000 portfolio?

Question 4

If the 1-day 1\% VaR is \100{,}000, what is the probability losses exceed \100{,}000 at least once in the next 10 independent trading days?

Question 5

Under the Basel traffic-light approach for backtesting 99\% VaR over 250 days, how many exceptions correspond to the yellow zone?