Calculate the var, Financial Accounting

An investment has a 92% chance of making a profit of $10 million, a 1.5% chance of losing $4 million, a 3% of losing $6 million, and a 3.5% chance of losing $16 million.

A)    What is the VaR for this investment when confidence level is 90%, 95%, or 99%?

B)    What is the expected shortfall when the confidence level is 95%?

C)    Suppose there is another independent investment with the following profile: a 94% change of making $3 million and a 6% change of losing $5 million. What is the VaR for a portfolio consisting of the two investments when the confidence level is 95%?

D)    What is the expected shortfall for the portfolio in C) when the confidence level is 95%?

E)     Does VaR in C) satisfy the subadditivity condition? How about the expected shortfall in D)?

Hint: for A), please realize that we have only three possible values; go from the gain to the loss until the total probability is bigger than 95%. For C), enumerate all the possible combinations of losses and gains, and then identify the 95 percentile.    

 

Posted Date: 3/25/2013 5:22:50 AM | Location : United States







Related Discussions:- Calculate the var, Assignment Help, Ask Question on Calculate the var, Get Answer, Expert's Help, Calculate the var Discussions

Write discussion on Calculate the var
Your posts are moderated
Related Questions
Fraudulent preferences The trustee can set aside any transaction effected within the six months preceding the presentation of the petition in circumstances such as to make it

Q. What do you mean by Inflation? Predicts of future inflation of sales prices and variable costs should be prepared Therefore that a nominal NPV evaluation is able to be under

Berg Company adopted a stock-option plan on November 30, 2013, that provided that 73,200 shares of $5 par value stock be designated as available for the granting of options to offi

An intersting point to not is that there is a difference in the tax treatment of income from Limitied Liability Companies (LLCs) and Corporations. What is this difference and what

What is the difference between financial statements prepared from the expanded accounting equation and those prepared from a trial balance?

Information concerning the capital structure of Piper Corporation is as follows: December 31, 2011 2010 Common stock 150,000 shares 150,000 shares Convertible preferred stock 15,00

Suppose you are a financial manager of Yuen Cheong Manufacturng Company. Due to the rising demand of product X, Yuen Cheong Manufacturng Company decides to open a new production pl

Concept of accounting for Wealth creation It is significant to recognise that generating wealth for the owners isn't the same as seeking to maximise the current year's profit.

1. Lett Corp declared and issued a 15% stock dividend when they had 100,000 shares of common stock issued and outstanding. The market price of the stock was $20 per share on the de

I need some guidance in how certain events are to be recorded on both the balance sheet and statement of cash flows.