What is the VAR ?

You have a $10m foreign exchange position
WHat is the VAR for 1 day with a confidence levl of 95%
period = 1 day
confidence = 95%
prob distribution = 1.645 (standard deviation)
correlation = 1 (as there is only 1 dataset)
volatility = assume the annual volatility of the GBP/USD exchange rate is 6%
daily volatility = 6% / sqr(trading days in a year) = 0.06/sqr(252) = 0.00377964


assume GPB/USD exchange rate is 1.6
$10m = £6.25m


VAR = 6,250,000 * 1.645 * 0.00377964
VAR = £38,859





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