1. Suppose that each of two investments has a 4% chance of a loss of $19 roillion, a 2% chance that a loss of $1 million, and a 94% chance of a prot of $1 million. The}r are independent of each other. (a) What is the VaR for one of the investments when the condence level is 95%? (b) What is the expected shortfall when the condence level is 95%? (c) What is the 1Val? for a portfolio consisting of the two investments when the condence level is 95%? [d] What is the expected shortfall for a portfolio consisting of the two investments when the condence level is 95%? (e) Show that, in this example, VaR does not satisfy the subadditivitjrr condition whereas expected shortfall does. 2. Show that if the portfolio loss is normally distributed with mean it and variance o2 and number Y satises P{Z <_c y x where z n then the condence var is p. are expected shortfall regulators have replaced var. with as a measure for market risk. assuming portfolio loss follows calculate dierence between these two measures. in we worked out of loans b and c slides chapter now work that portfolio. suppose backtest model using days data. level observe exceptions. should reject at use onetailed teststyle="">