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What of negative (short) positions? I Do we apply the same concept? Or do we have to calculate it separately for negative (short) and positive (long) positions?
Is it true that in this model you are assuming that µ=0, in other words, that there is no general drift in the market, no trend upwards in the stockprices. For daily data that is pretty common, but if we are working with for example 1-year VaR... you can better also use an assumption that µ!=0, right?
Hi, is the holding period of the portfolio taken into consideration? And if it is not do we need to multiply by the square root of the holding period? Thank you
No, this approach doesn't take holding period into consideration. So yeah you have to multiply a sqrt(252) to get the annualized VaR for this portfolio