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a. National Bank Asia wants to hire fresh young graduates to work in their Market Risk Management department. As you are preparing your interview, you need to understand some key problems, such as why do we use 500 days or more to evaluate the VaR in a historical simulation?

b) The bank assumes that the change in value of its emerging markets high yield bond portfolio follows a standard normal distribution. The management is not very happy with its one-day VaR estimated at US $3,000,000 with a confidence level of 97.5%. They want more accuracy at 99% confidence level and will probably ask you to answer two problems i) what is the one-day 99% VaR? ii) Therefore, determine the ten-day 99% VaR.

 

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