13. Consider the following discrete probability distribution of payoffs for two securities, A and B, held in the trading portfolio of an Fl: Probability 55% 44% 1% Probability 55% A $120m 95m -1,100m 44% 0.3% 0.7% $120m 100m -1,100m -1.414m a. Calculate the expected return on security A and B. b. Calculate the 99% confidence level VAR for security A and B c. Calculate the 99% confidence level expected shortfall for security A and B.
13. Consider the following discrete probability distribution of payoffs for two securities, A and B, held in the trading portfolio of an Fl: Probability 55% 44% 1% Probability 55% A $120m 95m -1,100m 44% 0.3% 0.7% $120m 100m -1,100m -1.414m a. Calculate the expected return on security A and B. b. Calculate the 99% confidence level VAR for security A and B c. Calculate the 99% confidence level expected shortfall for security A and B.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
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Question
Would like to know how to do this question about VAR and ES
![13. Consider the following discrete probability distribution of payoffs for two securities, A
and B, held in the trading portfolio of an Fl:
Probability
55%
$120m
Probability
55%
B
$120m
100m
-1,100m
-1.414m
44%
95m
44%
0.3%
1%
-1,100m
0.7%
a. Calculate the expected return on security A and B.
b. Calculate the 99% confidence level VAR for security A and B|
c. Calculate the 99% confidence level expected shortfall for security A and B.
d. Which of the two securities will add more market risk to the FI's trading portfolio
according to the VAR and ES measures?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F978a7394-f18b-4567-a972-848038aeb5bc%2F8faafe63-cf22-4906-a571-5af10c726b30%2Fobml8rr_processed.png&w=3840&q=75)
Transcribed Image Text:13. Consider the following discrete probability distribution of payoffs for two securities, A
and B, held in the trading portfolio of an Fl:
Probability
55%
$120m
Probability
55%
B
$120m
100m
-1,100m
-1.414m
44%
95m
44%
0.3%
1%
-1,100m
0.7%
a. Calculate the expected return on security A and B.
b. Calculate the 99% confidence level VAR for security A and B|
c. Calculate the 99% confidence level expected shortfall for security A and B.
d. Which of the two securities will add more market risk to the FI's trading portfolio
according to the VAR and ES measures?
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