Question
Investment A has 3% chance of a loss of $5 million, a 4% chance of a loss of $2 million and a 93% chance of
Investment A has 3% chance of a loss of $5 million, a 4% chance of a loss of $2 million and a 93% chance of a gain of $1 million.
Investment B will provide a gain that is normally distributed with a mean of $1 million and standard deviation of 2 million.
The investments are independent.
Calculate the value at risk and expected shortfall for each investment.
What is the value at risk for a portfolio consisting of the two investments with a confidence level of 95%? Does Value at risk satisfy the subadditivity condition in this case?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
