Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A coherent risk measure satisfies the property of sub - additivity. Suppose a stock whose random return can be approximately summarized by the following density
A coherent risk measure satisfies the property of subadditivity. Suppose a stock whose random return can be approximately summarized by the following
density function:
where ~~
Considering a target of what is the shortfall probability?
a The shortfall probability is somewhere between and
b The shortfall probability is somewhere between and
c The shortfall probability is somewhere between and
d The shortfall probability is somewhere between and
e The shortfall probability is somewhere between and What does subadditivity imply?
Question Answer
a
The risk measure for a combined portfolio should be smaller than the product of the risk measures of each portfolio.
b
The risk measure for a combined portfolio should not be greater than the product of the risk measures of each portfolio.
c
The risk measure for a combined portfolio should be greater than the sum of the risk measures of each portfolio.
d
The risk measure for a combined portfolio should not be greater than the sum of the risk measures of each portfolio.
e
The risk measure for a combined portfolio should be smaller than the difference of the risk measures of each portfolio.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started