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

What do you eman by lease, Q. What do you eman by Lease? Lease - Convey...

Q. What do you eman by Lease? Lease - Conveyance of buildings orland, equipment or other ASSETS from one person (LESSOR) to another (LESSEE) for a specific period of time for m

State accounting, discuss the importance of state accounting to an effectiv...

discuss the importance of state accounting to an effective fiscal administration

Question, A. Material Sampling -Analyzing Direct Material Costs You are r...

A. Material Sampling -Analyzing Direct Material Costs You are reviewing a cost proposal, which includes an $800,200 direct material estimate. After Initial examination of the pr

HELP!, How do you know what goes on an income statement? P.S. This is a bas...

How do you know what goes on an income statement? P.S. This is a basic income statement.

What should be didde''s 2011 earnings per common share, Didde Co. had 300,0...

Didde Co. had 300,000 shares of common stock issued and outstanding at December 31, 2010. No common stock was issued during 2011. On January 1, 2011, Didde issued 200,000 shares of

On January 7, On January 7, 2016, Captec Company purchased $4,175 of suppli...

On January 7, 2016, Captec Company purchased $4,175 of supplies on account . In Captec Company’s chart of accounts , the Supplies account is No. 15, and the Accounts Payable accoun

What is the monthly rate - annual rate, Suppose that the annual rate of int...

Suppose that the annual rate of interest is 4%. (a) What is the monthly rate? (b) Consider a 3-year lease on a car that is worth $20,000 today. The first payment on the lease

What was lavina''s accrual-basis net income (loss) for year, During 2011, L...

During 2011, Lavina Corporation had cash and credit sales of $94,000 and $91,000, respectively. The company also collected accounts receivable of $53,400 and incurred expenses of $

Hat is the after-tax cash flow from the salvage value, 48 Morgado Inc. has ...

48 Morgado Inc. has provided the following data to be used in evaluating a proposed investment project: Initial investment $130,000 Annual cash receipts $78,000 Life of th

Investment tax credit, 1.Assume that Abel business corporation is purchasin...

1.Assume that Abel business corporation is purchasing new equipment, for 350,000$ at the beginning of 2014. Assume that Abel business corporation is in the 30% corporate tax bracke

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