M7 Adaptive Quiz_Chapter 10

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M7 Adaptive Quiz - Chapter 10. What does the following statement mean? "We are 99% certain that we will not lose more than $1.5 million in 10 days." O 10-day 99% VaR is - $1.5 million. O 1-day 99% VaR is - $1.5 million for 10 days. Your answer : W 10-day 99% VaR is $1.5 million. 10-day 99% VaR is $1.5 million. O 1-day 99% VaR is $1.5 million for 10 days. Response: Correct! The figure below illustrates 90% VaR on the probability density function for the returns of a portfolio. What is the yellow area? 90% VaR = 2 million @ 10% 10% O 90% O 5% Response: Correct! O 95% A $5 billion 5-day VaR figure with 95% confidence means: O the VaR over the next day is $5 billion with 95% confidence. O there is only a 5% chance that we will gain more than $5 billion in 5 days. O the minimum loss over the next 5 days is expected to be at least $5 billion in 95% of the cases. 'the loss over the next 5 days is expected to be at most $5 billion in 95% of the cases. the loss over the next 5 days is expected to be at most $5 billion in 95% of the cases. Response: Correct!

The probability density function (pdf) for daily profits at ABC Inc. can be described by the following function (see figure below), p=1/10 for-5<sm<5 p 1/10 -5 5 Tt Response: The one-day 95% VaR for ABC Inc is a loss of : Correct! Your answer 4.5 The probability density function (pdf) for daily profits at XYZ Inc. can be described by the following function (see figure below), p=1/15 for-10<sm<5 1/15 -10 5 n From this probability density function, the one-day 99% VaR for XYZ Inc. is a loss of 9.85 (Try to calculate VaR on your own.). Then, the one-day 99% ES for XYZ Inc. is a loss of : Your answer I 9.924

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