Suppose you've estimate that fifth-percentile value at risk of a portfolio is - 30%. Now you wish to estimate the portfolio's first-percentile VaR (the value below which lie 1%) of the returns). Will the 1% VaR be greater or less than - 30%?

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Business

Trystan Dunn

28 March, 14:01

Suppose you've estimate that fifth-percentile value at risk of a portfolio is - 30%. Now you wish to estimate the portfolio's first-percentile VaR (the value below which lie 1%) of the returns). Will the 1% VaR be greater or less than - 30%?

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Janiya Lucas · Answer 1

The 1% VaR will be less than - 30%. As percentile or probability of a return declines

so does the magnitude of that return. Thus, a 1 percentile probability will produce a

smaller VaR than a 5 percentile probability