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

The deficiency account-bankruptcy accounts, The Deficiency Account Pur...

The Deficiency Account Purpose of deficiency account : The purpose of the deficiency account is to explain the deficit shown on the statement of affairs. The deficiency acc

Evaluate value of rights per existing share, Q. Evaluate Value of rights pe...

Q. Evaluate Value of rights per existing share? Rights issue price = 4·00 × 0·85 = $3·40 Theoretical ex rights price = ((5 × 4·00) + 3·40)/6 = $3·90 Value of rights per e

Budgeted purification fixed, XYZ Municipality purifies water before it ente...

XYZ Municipality purifies water before it enters the reticulation network. There are presently 3 purification processes available to the municipality. These processes sre referred

Use spreadsheet to determine allocation, The Red and Blue partnership has b...

The Red and Blue partnership has been created to operate a law firm. The partners have been attempting to devise a fair system to allocate profits and losses. Red plans to work mor

What accounting method (cash or accrual) would you recommend, What Accounti...

What Accounting method (cash or accrual) would you recommend for the following businesses? a. A gift shop with average annual gross receipts of $900,000 b. an accounting partnershi

Construct the market value balance sheet, Construct the Market Value Balanc...

Construct the Market Value Balance Sheet XYZ, Inc., another company founded by Larry Davidson in 2005, is currently entirely equity financed. That means the company carries no

Stock''s expected constant growth rate, Normal 0 false false ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4 The beta coefficient

What amount of amortization expense, Day Corporation purchased a patent on ...

Day Corporation purchased a patent on January 1, 2012 for $360,000. The patent had a useful life of 10 years at that date. In January of 2013, Day successfully defends the patent a

Bonds, How to prepare a bond amortization sheet

How to prepare a bond amortization sheet

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