Calculate the var, Financial Accounting

Assignment Help:

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.    

 


Related Discussions:- Calculate the var

Prepare income statement for current year, following are the amounts of the...

following are the amounts of the assets and liabilities of St. Kitts Travel Agency at December 31, 2010, the end of the current year, and its revenue and expenses for the year. The

What is fair value in stock market, Q. What is fair value in stock market? ...

Q. What is fair value in stock market? Fair value - Amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between

What is amortization, Q. What is Amortization? Amortization -Periodic a...

Q. What is Amortization? Amortization -Periodic and Gradual reduction of any amount, like the periodic write-down ofa BOND premium, cost of an intangible ASSET or periodic paym

Financial accounts, The following items are found in the trial balance of M...

The following items are found in the trial balance of M/s Sharada Enterprise on 31st December, 2000. 10 marks Summer 2013 Sundry Debtors Rs.160000 Bad Debts written off Rs 9000 Dis

Determine the evidence on the usefulness of accounting, Evidence on the use...

Evidence on the usefulness of accounting There are convincing evidence and arguments that accounting information is at least perceived as being useful to users. Various researc

The brownstone corporation''s bonds , a) What will be the value of every of...

a) What will be the value of every of these bonds when the going rate of interest is 12%? Suppose that there is only one more interest payment to be made on Bond S. Round your answ

Mutual dealings-bankruptcy and liquidation, MUTUAL DEALINGS A right of ...

MUTUAL DEALINGS A right of set-off is allowed where there have been - (a) Mutual credits, debts or other dealings resulting in pecuniary liabilities, (b) Between the debtor an

Adjudication order-adjudication of debtor, Adjudication order The court...

Adjudication order The court may adjudge the debtor bankrupt on the application of the O.R. or any creditor in the following cases: If the creditors so resolve at their first

Settlement of liabilities-trustee account, SETTLEMENT OF LIABILITIES Wi...

SETTLEMENT OF LIABILITIES Wide powers of compromise are granted to trustees by the Trustee Act. Two or more trustees or a sole trustee, where authorised, may:   1. Pay or allow

Explain r and r-squared- f-test and interpret its value, To decide in what ...

To decide in what zone should be placed a store which sells video-cassettes, the manager of a firm which sells and rents cassettes makes a study to estimate the demand for each sto

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd