VAR increase with time interval only true when R is assumed at 0%. Otherwise, math won’t hold. Confirmation? Anyone?

I believe you can only exptrapolate a Daily VAR to multiple days if you assume R = 0% for daily, otherwise math doesnt hold.

VAR increase with time interval. Always true, unless your portfolio is all Rf. You invest for longer, you’ll have bigger potential losses.

^I think he was referrign to exptrapolating a Daily VAR estimate to a Monthly/Qrtly/Annual VAR which can only be done when Daily return is assumed to be 0%. But yes you are correct that the longer the time priod or Higher the Confidence LEvel the Higehr the VAR will be.

bigwilly is right. TooOld4This, yes, but would you agree the assumption is R = 0%? VAR = R - z*sd. If R <> 0, R will increase with t Sd increase with sqrt (t) Then VAR will decrease with time interval…

If R is increasing more than SD for each t, how will the VAR get smaller as t increases?

Usually is VAR = 10% - 20% = -10% With R increase, such might be -5%, thus VAR decrease. But if we assume R = 0, no such issue any more…

We assume R is 0 when we talk about VAR unless specified otherwise

what’s going on here? VAR = R - z*sd. increase the time interval to t, assume t > 1 then new VaR = t R - z sd * sqrt(t) the VaR will decrease if t R - z sd * sqrt(t) > R - z*sd or R > z * sd / (sqrt(t) + 1) you dont need zero R, but need to be smaller than z * sd / (sqrt(t) + 1). look at ex 10 in reading 37, R is not zero but Var increase with time interval.

Yes! actuaryalfred is good! 1) If R is small enough (0 is for simple example), VAR will increase with time. 2) If R is big enough, VAR will actually decrease. In Exam, go with comp_kid: R = 0

t R - z sd * sqrt(t) > R - z*sd R*(t-1) > z*sd *(sqrt(t)-1) R > z * sd * ( (sqrt(t)-1) / (t-1) )

comp_sci_kid Wrote: ------------------------------------------------------- > t R - z sd * sqrt(t) > R - z*sd > > R*(t-1) > z*sd *(sqrt(t)-1) > > R > z * sd * ( (sqrt(t)-1) / (t-1) ) And (t - 1) = (sqrt(t) + 1)(sqrt(t) - 1) which leads to actuaryalfreds answer.

fsa-sucker Wrote: ------------------------------------------------------- > comp_sci_kid Wrote: > -------------------------------------------------- > ----- > > t R - z sd * sqrt(t) > R - z*sd > > > > R*(t-1) > z*sd *(sqrt(t)-1) > > > > R > z * sd * ( (sqrt(t)-1) / (t-1) ) > > And (t - 1) = (sqrt(t) + 1)(sqrt(t) - 1) which > leads to actuaryalfreds answer. yes he just skipped the step of a^2-b^2 = (a+b)(a-b)