Exercise Solution 14.6

With [14.12], [14.13] and [14.14], we calculate = 0.9793,  = 0.7143 and   = 0.9719. By [14.20], Λ = 0.03446, so –2log(Λ) = 6.736. This exceeds the 0.99 quantile of the χ2(1,0) distribution, which is 6.635. We reject the VaR measure at the .10 significance level.

 

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