The Calculations For The Four Index Example At The End Of Section 20 6 Assume That T 1418706

The calculations for the four-index example at the end of Section 20.6 assume that the investments in the DJIA, FTSE 100, CAC40, and Nikkei 225 are $4 million, $3 million, $1 million, and $2 million, respectively. How does the VaR calculated change if the investment are $3 million, $3 million, $1 million, and $3 million, respectively? Carry out calculations when a) volatilities and correlations are estimated using the equally weighted model and b) when they are estimated using the EWMA model. What is the effect of changing ? from 0.94 to 0.90 in the EWMA calculations? Use the spreadsheets on the author’s web site.

Prof. Angela


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