Confidence interval and standard deviation I'm currently talking an

Liseskirlsojh

Liseskirlsojh

Answered question

2022-03-26

Confidence interval and standard deviation
I'm currently talking an intermediate course in finance where we want to calculate Value-at-Risk for portfolios and bonds. To use this VaR formula I need to know the standard deviation for different confidence intervals. Now my teacher have put up the following standard deviation for different confidence intervals:
C.I90=+1,64S.d
C.I95=+1,96S.d
C.I98=+2,33S.d
C.I99,9=+3,09S.d
When I watched an old exam for calculating VaR, the C.I was 99% and the student wrote that the S.d was equal to 2,33. How is this possible? (P:s the student got an A on this exam).

Answer & Explanation

Raiden Griffin

Raiden Griffin

Beginner2022-03-27Added 13 answers

This is correct. Have a look at this standard table of the normal distribution probability. You find that, for ZN(0,1),
P(<Z2.33)0.9901
this comes from a numerical evaluation of
Φ(2.33);=;12π2.33et22,dt0.99009692444083574978997
Φ(2.33);=;12π2.33et22,dt0.99009692444083574978997

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