I've stumbbled into this question in a job interview and didn't know how to answer it:

Calculate the VaR of a portfolio where you are long put and long a call

  • $\begingroup$ I don't know the answer immediately, but as a first step I would think "what are the scenarios where you lose money when you have such a position. What is the worst scenario". This is straightfoward. $\endgroup$ – noob2 Jul 16 at 16:02
  • $\begingroup$ Assume strikes, simplify to X(C)=X(P)=S_0. Then you cannot lose more than your initial outlay. VAR will be ‚a Little Bit‘ less than That. $\endgroup$ – Kermittfrog Jul 16 at 22:29

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