Applying the Value-at-Risk Method
Solve the following problem:
You use today's spot rate of the Brazilian real to forecast the spot rate of the real for 1 month ahead. Today's spot rate is $.4558. Use the value-at-risk method to determine the maximum percentage loss of the Brazilian real over the next month based on a 95 percent confidence level. Use the spot exchange rates at the end of each of the last 6 months to conduct your analysis. Forecast the exchange rate that would exist under these conditions.