Learning Exercise 3
Value at Risk
Instructions: Complete this assignment by downloading the data and then answering the questions in this word document. Then submit it electronically on class.pace.edu website.
Note: Submission is set only before the deadline. Late assignments can’t be submitted.
Get the daily closing prices data for SPDR Gold Shares (GLD), Financial Sector SPDR Fund (XLF) and SP500 (^GSPC) from finance.Yahoo for the period 2005-01-01 to 2020-12-31. Create the returns variable for each series and plot graphs.
For each asset (GLD, XLF, and ^GSPC) assume that you have a position of $1,000,000. What was the 1% one day Value at Risk for each asset when the market opened on Monday, January 4, 2021?
Using the quantile from one year history
Using the quantile from five-year history
Using the quantile from ten-year history
Using the quantile from the full data set
Using the normality assumption and a GARCH(1,1) model
Using the GJR-GARCH model with normality
Using the GJR-GARCH model with bootstrapped residuals
2. Go to VLAB (http://vlab.stern.nyu.edu/) and
A. find the volatility forecasts one day and one year ahead for the following assets using the GJR-GARCH model. Make sure to state the date when you get the forecasts from VLAB.
S&P500
Ibovespa Brasil Sao Paulo Stock Exchange Index
Barclays US Aggregate Government Index
Tesla
MBIA
Euro Exchange rate
iShares Cohen & Steers REIT ETF
Bitcoin to US Dollar
B. Describe why these numbers are consistent with the information based description of asset volatility for each of the assets.