for those who have sat the online exams or anyone with super VaR knowledge there was one point that I did not understand: id confidence interval went up from 95% to 99% - why does VaR value go up? VaR = R - (sd)(z) and Z for 99% > Z for 95% … hence shouldn’t VaR go down as a result? any takers on this one?
Because now you are MORE CONFIDENT so you have a larger value For example you are 95% confident that you wont lose more than $5,000 next month you are 99% confident you wont lose more than $10,000 next month The numbers are arbitrary but it makes the point. What is a Pirates favorite Risk measure? VARRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
The Edge Wrote: ------------------------------------------------------- > for those who have sat the online exams or anyone > with super VaR knowledge > > there was one point that I did not understand: id > confidence interval went up from 95% to 99% - why > does VaR value go up? VaR = R - (sd)(z) and Z for > 99% > Z for 95% … hence shouldn’t VaR go down as > a result? > > any takers on this one? You should note that R - sd * z is (usually) a negative number at 95%. and Var is the abs value of that. So Var actually = sd * z - R, which goes up as z goes up.
fsa-sucker - you are right we are dealing with the loss end of the curve …thank you!
Yup. I need watch these type of questions very carefully, easy to tick the first obvious answer and move on…