A client has given you a $1,000,000 allocation at the start of the year and...
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A client has given you a $1,000,000 allocation at the start of the year and you have invested it into a portfolio of common stocks and fixed-income instruments with a current value of $1,350,000, a 1 year return of 35% and a volatility of 18%. She is concerned that a catastrophe event, similar to that historically experienced in the markets, will cause her portfolio to lose her entire 1 year return. As her portfolio manager you decide to calculate her left tail risk level at 99% confidence to give her an idea of what she is exposed to. What is her VaR at this confidence? VaR = Using this VaR level we can say we
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