Sign up  |  Log in

which VaR smaller?

for a given portfolio,

5-day 5% VaR vs 5-day 2.5% VaR

other things the same. 

which one is smaller? 

2.5% VaR has higher z score and thus has smaller VaR? wrong? 

You’ve made it this far, and you know what it takes to pass. Don’t be fooled by false promises and unrealistic claims. Schweser’s CFA® study packages give you the proven study tools and expert instruction you need to finish the job.

I think you got it mixed up.

5% VaR has smaller VaR than 2.5%

As you said, VaR 2.5% has higher z-score and is more extreme than 5% VaR. 

Think about is this way: if you have a $100m portfolio, is it more probable to incur $5m loss or $15m loss?

It ain't what you don't know that gets you in trouble. It's what you know for sure that just ain't so.

5% - 5 day : [E(r) - 1.65 (std dev)] * Dollar portfolio

1% - 5 day : [E(r) - 2.33 (std dev)] * Dollar portfolio

2.5% 5 day - will  be between it.

"Let's kill him properly this time" (Thor - Endgame)

https://www.youtube.com/watch?v=N5I6235vlok

FRM Holder - 2012
Passed CFA Level III - 2019

5% VaR is the min loss you can expect to exceed with a probability of 5%

2.5% VaR is the min loss you can expect to exceed with a probability of 2.5%

Are you more likely to run late for work, or get struck by lightning?

The loss is greater the lower the probability threshold.