Question

The net trading positions of EE Bank have a net value of $1,200 and a computed 1- day 99% VaR of $46,000. What is the minimum percentage loss that would be considered a tail event for this portfolio? Note: Your answer in must be expressed in percentage terms and accurate to within 0.01%. E.g., if you find the minimum percentage loss is 12.34%, then put 12.34 as your answer.

Answer 1

we are calculating daily var at 99% confident level at 1% significance level = $1200

var = $1200 * 2.33 = $2796

=($46000-$2796)/$46000 =93.92%-100%= 6.08%

Loss can be 6.08% or $2796.