Question
Suppose that each of two independent investments has a 2% chance of a loss of $10 million and 98% chance of a profit of $1
Suppose that each of two independent investments has a 2% chance of a loss of $10 million and 98% chance of a profit of $1 million.
What is the Value-at-Risk for one of the investments with confidence level 99%?
What is the expected shortfall for one of the investments with confidence level 99%?
What is the Value-at-Risk for a portfolio consisting of the two investments when the confidence level is 99%?
What is the expected shortfall for a portfolio consisting of the two investments when the confidence level is 99%?
In addition, how much cash in this portfolio do you need to hold so that the probability of a negative portfolio value is less than 1%?
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Agricultural Finance
Authors: Charles Moss
1st Edition
0415599075, 978-0415599078
