David,

In your question set on OpRisk B (question 5) you scale 1D LVaR to 10D LVaR using SQRT(10). Intuitively, I would only scale VaR (23,300 in the example) to 10D, and then add the same 1/2 spread as previously - as the spread is calculated on the full position of $1m and assumed constant at 0.3%.

so my solution would be: $1m * 0.01 * 2.33 * SQRT(10) + 0.5 * $1m * 0.003 = 75,181

Obviously this accounts only for the easy version of LVaR (ie w/o a stdev of spread given). Or do I miss something?

Thanks for enlightenment!

Michael

Micheal,

I 100% agree with you (constant spread means don’t scale the spread with time).

I checked this against Dowd reference, he agree with you too: “liquidity adjustment...falls as holding period increases.”

My mistake. It is fixed...thanks for superb observation

David