Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need help on figuring out how to arrive at this answer. I understand how to get the expected return in the first part of the

Need help on figuring out how to arrive at this answer. I understand how to get the expected return in the first part of the question, I just need help figuring out the rest of the problem. Thanks!

Q: Suppose you invest in a product whose returns follow a uniform distribution between -40% and +60%. What is the expected return? What is the 95% VaR? The expected shortfall?

A: The expected return is +10%. The 95% VaR is 35% (i.e., 5% of the returns are expected to be worse than -35%). The expected shortfall is 37.5% (again the negative is implied).

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Healthcare Finance

Authors: Paula H. Song, Kristin L. Reiter

4th Edition

1640553223, 978-1640553224

More Books

Students also viewed these Finance questions

Question

Why do auditors use specific performance materiality?

Answered: 1 week ago

Question

What is the meaning of self-regulating profession?

Answered: 1 week ago