Daily VAR

CFA Level III
#1

Should we use 360 or 250 to do the adjustment?

For example,

Daily E® = Annual E® / 250

Daily S.D = Annual S.D. / (250)^(1/2)

#2

Schweser only says this:

For a very short period (1-day) VAR can be approximated by ignoring the return component (i.e., enter the return as zero). This will make the VAR estimate worse as no return is considered, but over one day the expected return should be small.

Buy my understanding is Daily VAR is prevailing in derivative?

#3

Your formulas are correct, but the multiplier varies. I use 252, but I think we have less bank holidays in the UK. I’m pretty confident the CFA will give you the convention if they ask for daily.

#4
  • daily VaRs --> I saw 250