Interview Question: Risky Values

Sample Question #19 (finance)

What does VaR (value at risk) measure? What are some of the assumptions behind the VaR concept? Given two portfolios A and B, does the following relationship hold: VaR(A+B) = VaR(A) + VaR(B)? Why or why not (i.e., prove your previous answer)?

Advertisements
This entry was posted in Sample Qs. Bookmark the permalink.

One Response to Interview Question: Risky Values

  1. Anil Kumar says:

    no this relationship does not hold. We need to know correlation factor.The correct relationship will beVaR(A+B)=SQRT( VaR(A)^2+VaR(B)^2-2*rho*VaR(A)*VaR(B))

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s