Ran into a question that gave this in the problem set:
5% Annual VaR = [9.4% - (1.65 × 14.2%] = -14%
5% Daily VaR = [(0.0376% - (1.65 × 0.0568%)] = -0.056%
The question The calculated percentage value for daily VaR in Exhibit 1 is most likely:
A) correct given the assumptions and method described. B) too high given the assumptions and method described. C) too low given the assumptions and method described.
I calculated the daily VAR as [(0.0376% - (1.65 × 0.898%)] = -1.44%, which according the results is correct. However, the use of “too low” and “too high” are kind of weird. I choose B, because exhibit one said the daily VAR was -0.056% which is too high. The correct VAR should be -1.44% (a lower number).
Schweser has the answer as C with the explanation: This would result in a 5% daily VaR = [(0.0376% - (1.65 × 0.898%)] = -1.44%.
Is my english off? Isn’t the answer too high, not too low? This happen in another question that compared two negative answers as too high and too low, only that time it was the opposite answer as this question.