Example of how to calculate VaR

We have a position consisting of a €100000 investment in asset A and a €100000 in B. Daily volatilities of both assets are 1% and the coefficient of correlation between their returns is 0.3. What is the 5-day 99% VaR for the portfolio?

s(A) = €100000 * 1% = €1000
s(B) = €100000 * 1% = €1000

Var(A+B) = sqrt(s(A)^2 + s(B)^2 + 2ps(x)s(y))
Var(A+B) = sqrt(1000^2 + 1000^2 + 2*0.3*1000*1000) = 1612.5

Assuming that the mean change is zero and that the change is normally distributed, the on day 99% VaR is 1612.5 * 2.33 = 3757.13.

The five day VaR is 2757.13*sqrt(5) = 8401.2.