|Question||Values for the NASDAQ composite index during the 1,500 days preceding March 10, 2006, can be downloaded from the author’s web site. Calculate the one-day 99% VaR and the one-day 99% ES on March 10, 2006, for a $10 million portfolio invested in the index using
(a) The basic historical simulation approach.
(b) The exponential weighting scheme in Section 13.3 with ? = 0.995.
(c) The volatility-updating procedures in Section 13.3 with ? = 0.94. (Assume that the initial variance when EWMA is applied is the sample variance.)
(d) Extreme value theory with u = 300 and equal weightings.
(e) A model where daily returns are assumed to be normally distributed with mean zero. (Use both an equally weighted approach and the EWMA approach with ?= 0.94 to estimate the standard deviation of daily returns.)
Discuss the reasons for the differences between the results you get.