Significance for VAR

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pupdawg82

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Please confirm
95% - 1.96
99% - 2.33
schweser has taken 1.65 for 95% level of significance.
 
1.96 stipulate the you are looking at both left and right side of the distribution ( 2.5% left, 2.5% right ), which is not the case for VAR, you only look at the left side of the distribution ( 5% left side ).
 
summerside182 wrote:
1.96 stipulate the you are looking at both left and right side of the distribution ( 2.5% left, 2.5% right ), which is not the case for VAR, you only look at the left side of the distribution ( 5% left side ).
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Correct.
You are looking at the two tailed z value. If you are using a two tailed valued you should be looking up 90% for 95% var.
 
pupdawg82 wrote:
thanks. So what would be value at 90%?
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you are still thinking in terms of 2 tailed tests…
1.65 for Var = 90% confidence, but it is just worded differently.
for a 90% confidence interval, you have 5% in both tails, which you use the 1.65 for.
When we are talking VAR, we mention something like “5% VAR”. This is the same as have 5% in each tail, but we only care about the left side tail. There is still the 5% chance on the right side as well, we just ignore that fact.
 
Just remember the following and you will have no problems…
95% var = 1.65
99% var = 2.33
 
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