Question

The historical 1-month credit loss distribution of a portfolio of loans in million euros is well approximated by a Normal distribution with mean 5 and standard deviation 2.

The monthly VaR is more or less

Answer 1

the amount of money that the portfolio of loans is likely to lose with a probability of 1%. This can be calculated by taking the inverse of the cumulative normal distribution with mean 5 and standard deviation 2, which is approximately 8.2 million euros.