For measuring investment risk

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Reference no: EM131056306

You manage a mutual fund worth 100 million dollars today. The return on your portfolio in 10 days is normally distributed with mean 0 and standard deviation 2 million. Find the number N such that you can say the following: “I am 99% sure that my fund will not lose more than N dollars after 10 days.”

(N is known as the 10-day Value at Risk, a tool developed my JP Morgan in the 1990s for measuring investment risk. It is suppose to approximate a “worst-case” scenario, by ignoring the worst 1%. This approximation some blame as a partial cause of the many bank failures in 2008-2009.)

Reference no: EM131056306

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