# Bank of Alaska's stock portfolio has a market value of $10 million. The beta of the portfolio... ## Question: Bank of Alaska's stock portfolio has a market value of$10 million. The beta of the portfolio approximates the market portfolio, whose standard deviation (am) has been estimated at 1.5%.

What is the five-day VAR of this portfolio using adverse rate changes in the 99th percentile?

## Value At Risk:

The value at risk is the potential periodic loss to the portfolio with a given probability. The loss depends on the probability required and the standard deviation of the portfolio returns which is a measure of risk.

The VAR of the portfolio is estimated to be $78,150.58 The standard deviation for One tailed return from the Z Score table is 2.33 Standard Deviations. The VAR can be calculated as: VAR = Z-Score * SD * Portfolio Value * Sqrt(Days) From the question, we have the value as: • Z-Score = 2.33 • SD (Standard Deviation) = 1.50% • Portfolio Value =$10,000,000
• Days = 5

We have:

VAR= 2.33 * 0.015 * $10,000,000 * Sqrt(5) VAR =$78,150.58 