Ans 2 SPY ETF is the Standard and Poor’s 500 Stock market index based on market capitalization of 500

leading publicly traded companies in US stock market as determined by the Standard and Poor. It covers 500 leading companies of US covering 75 percent of US equites (according to S&P) and it is a free float capitalization weighted index. As Arbor City is a relatively small size fund(less scope of any major volatility which may erode the net worth of the fund), its reliance is majorly on passive investing strategy for growth and returns. Passive investing strategy looks to mimic the return of the market. So a 36 percent exposure in S&P 500 Index make sense as it covers 75 percent of equity market and will imitate the best market trends which is the central theme of passive investment strategy. Ans3 Value at risk (VaR) is a probabilistic method of measuring the potential loss in portfolio value over a given time period and for a given distribution of historical returns(of S&P 500 Index) .VaR is the dollar or percentage loss in portfolio (asset) value that will be equaled or exceeded only X percent of the time, that means there is an X percent probability that the loss in portfolio value(Arbor’s exposure in S&P 500) will be equal to or greater than VAR measure. Fund’s director would look at the various VaR (1%), VaR (5%) and VaR (10%) respectively, and select the X percent probability of interest and the time period over which VaR will be measured. Here as per the previous question this time period is one day.

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