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
Explain:- Q.1 Explain the ways in which the needs of internal and external users of accounting information are the same and different. Q.2 Why is it important for financial sta

1. This assignment is to be submitted as an individual assignment.  2. Marks will be deducted for poor quality presentation. For guidance on the requirements for the presentatio

Calculate the DuPont Model, given the following information: cash=$16,080; accounts receivable= $9,500; prepaid = $3,150; supplies =$675; equipment =$25,200; accumulated depreciati

Calculation of the actuarial gain/losses in year to 31 December 2010 FV of plan assets PV of plan liabilities $000

Ask question Sean Corp. issued a $60,000, 10 year bond at the face rate of 8% annually on 1/1/X0. The market rate was 10%. How much cash will the bond investors receive at the end

how do i find info about google inc

Registration of a D of A and assent of creditors A D of A will be void unless it is registered with the Registrar within 7 clear days after first execution and is properly stam

Suppose that Oxford Inc. is interested in the two new products, AME and CGK. Because of its capital budget constraint, it can only launch one new product line. Eric just graduated

Choose a share from a market such as LSE, NYSE, NASDAQ, etc. [Data sources could be Datastream, Google Finance or others]. Prepare a report which involves the following aspects: -

The non current asset section of Aadil & Co. at December 31, 2005 is as under:- Land Rs. 1,000,000 Office equipment Rs. 5,000,000 Less: accumulated depreciation 250,000 4,75