Normal distribution theory table/VaR

mac1

Is anyone able to tell me? A value at risk calculation confidence level of 95% equals 5% on a normal distribution table of -1.65 standard deviations. But I cannot see where this comes from on a normal distribution table, other than it's kind of the first area of the bell curve; I cannot tell anything from the Kaplan Complete Text and I'm none the wiser from numerous pages on the internet. It's for risk assessment of investment portfolios/assets for the ACCA P4 module. I could memorise it as -1.65 std deviations I suppose, but it would be good to know anyway.

Many thanks.

SandyHood

See if this helps
http://www2.accaglobal.com/pubs/students/publications/student_accountant/archive/sa_oct09_pogue.pdf

mac1

Cheers! Unfortunately the article still doesn't show me where the -1.65 or -2.33 standard deviations figures come from. Still, at least I know that they're for 95% and 99% probability, so I'll just have to take them as is.

SandyHood

Look at the normal distribution table
The value for 1.65 is rounded off as 0·4505

This shows only one side of the mean on the curve
But a normal distribution is equal on either side of the mean

So if you are looking for a 0.9 value (90%) then you are looking for +/- 1.65 standard deviations from the mean

And a 95% is 0·475 x 2 (found at the 1.96 standard deviations point)

There was a time when statistics was part of the ACCA qualification - I certainly remember "Decision Making Techniques".

SandyHood

F9 has normal distribution and standard deviation in the current syllabus

He is an article with aspects aimed at the non-technical reader
See if it helps
http://riskinstitute.ch/Question11_b.htm

Otherwise see if your local library has an introductory statistics textbook