I am currently practicing for my Risk Management exam in July but my lecturer is of no help and my colleagues and I have no idea on how to proceed with this question. The past exam papers have similar questions so I would appreciate any advice on how to proceed with such a question. In so doing, I would be able to follow similar logic in attempting questions like these. Thanks in advance
Consider the following historical information on a portfolio currently valued at USD 100 million:
Log Returns 02/01/2004 -0.20% 05/01/2004 -0.15% 06/01/2004 0.14% 07/01/2004 0.30% 08/01/2004 -1.43% 09/01/2004 -0.79% 12/01/2004 0.55% 13/01/2004 -0.53% 14/01/2004 0.80% 15/01/2004 0.13%
Compute a one-day, 20% volatility-adjusted historical VaR and the Expected Shortfall of the portfolio. The volatility is to be estimated using an exponential moving volatility model with 𝜆 = 0.96. As at 01/01/2004 the variance forecast is 0.0000053%.