Two Million VaR

VaR at confidence level $1-\alpha$ for a mean-zero normal P&L is $z_{\alpha }\times \sigma$.

Multiply the given standard deviation by the given z-quantile.

1. 1. Apply the normal VaR formula

   ${\text{VaR}}_{95\%}=z_{0.95}\times \sigma =1.645\times \text{\$}2\text{ million}$.

   $$\text{VaR}=1.645\times 2=3.29$$

2. 2. Conclude

   The 95% one-day VaR is $\text{\$}3.29$ million.

Answer: $3.29 million