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An Investor Has $2,000 Invested in Stock a and $5,000

question 17

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An investor has $2,000 invested in stock A and $5,000 in stock B. The daily volatilities of A and B are 1.5% and 1% respectively and the coefficient of correlation is 0.8. What is the one day 99% VaR? Assume that returns are multivariate normal (Note that N(-2.326) =0.01)


Definitions:

Public Company Accounting Oversight Board (PCAOB)

A nonprofit corporation established by Congress to oversee the audits of public companies in order to protect the interests of investors.

Investment Company Act of 1940

A law that regulates investment companies and the activities they engage in, including mutual funds, to protect the interests of investors.

Mutual Funds

Investment programs funded by shareholders that trade in diversified holdings and are professionally managed.

Trading in Securities

The practice of buying and selling stocks, bonds, and other financial instruments, typically for short-term profit.

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