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What is the 90-var on bond

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Reference no: EM132739974

You invest $200 in a newly listed corporate bond. The promised payback on this bond in 2 years' time is $220. You estimate that there is a 2% probability that the company will default on the bond with a recovery of 10% of the promised amount. There is also an 8% probability that the company will default on the bond and you will be able to recover 70% of the promised amount. With 90% probability, the company will not default and repay the bond in full. What is the 90%-VaR on this bond?

Reference no: EM132739974

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