I’m finding VaR. I have yield volatility = 1.75%. 21 trading days and 99% CI. Using normal distribution, They solve for expected change in yield using:
1.75% x 2.33 x (21^.5) = 18.7 bps.
Why does this equal 18.7 bps? Solving this, I just have 18.7%. Why is it basis points?
Where’s the question?
1.75% per day sounds high, but 1.75bps per day does not.
Once again, it’s from the 2022 curriculum. Maybe ignore me (haha). Example 20 on page 101 of credit strategies. They do same thing in EOC question 21, They do mention daily volatility once again.
Confusing.
18.7% = 1,870 bps.
You are correct. Thank you.