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An investment portfolio, P, is made up of a risk free asset (R F ), 3 long asset X, and 2 short asset Y. That
An investment portfolio, P, is made up of a risk free asset (RF), 3 long asset X, and 2 short asset Y. That is: P = RF + 3X - 2Y. Prices of X and Y are bivariate normal and have a correlation of 0.6. The 1-year price of X is normally distributed with mean 75 and variance 300, while 1-year price of Y is normally distributed with mean 60 and variance 400. The risk-free asset is expected to be worth 20 in a year's time. Calculate the 5% Tail-Value-at Risk for the value of the portfolio after a year.
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