1 the var on a portfolio using a one-day horizon is usd 100, Ask an Expert

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1. The VAR on a portfolio using a one-day horizon is USD 100 million. What is the VAR using a 10-day horizon? Explain your approach. If stock market returns are not normally distributed, how would this affect your answer? What if they follow a process with jumps (possibility of a crash at any time)?

2. A stock price today is 100. Every day it can go up or down by 10% with probability 0.5. Show the price development path over 4 days in a binomial tree. What is the probability that the stock price falls below 90 in 4 trading days?

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