FINC 512 – Quiz #5 (15pts)
Name ______________________ Date ______________
Suppose you’ve just estimated that the fifth-percentile value at risk of a portfolio is -30%. Now you wish
to estimate the portfolio’s first-percentile VaR . Will the 1% VaR be greater than or less than -30%?
The 5th percentile VaR equates to a return that should happen 5% of the time or less. Therefore, the
1st percentile VaR would be a return that should happen 1% of the time or less. If the 5th percentile
VaR is -30%, then the 1st percentile VaR must be less than that. For example, it might be -45% or 55%.