The VaR in this case will be the top quintile of observations. In this case, since there are exactly 100 observations, this would mean the worst return would become the VaR. Therefore Choice 'b' is the correct answer. Choice 'a' and Choice 'c' make no sense. This highlights that at higher confidence levels, fewer and fewer observations impact the VaR if we are using historical simulation based VaR.
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit