Homework Help is Here – Start Your Trial Now!
Math
Statistics
5. Suppose we have a risky asset with random return R. We have defined R to be, S1 - So So Now we introduce the log-return, which is defined as R = In (). In this question, assume that R~ N(u, o2) where =0 and o² = 0.1. (i) Show that R = eR - R= 1. (ii) Calculate VaR0.95 for an investment of £150. Remember that if X~ N(μ,0²) then exis lognormally distributed with parameters and o². You may use that for a standard normal random variable -¹(0.05) = -1.6449, where denotes the CDF.

5. Suppose we have a risky asset with random return R. We have defined R to be, S1 - So So Now we introduce the log-return, which is defined as R = In (). In this question, assume that R~ N(u, o2) where =0 and o² = 0.1. (i) Show that R = eR - R= 1. (ii) Calculate VaR0.95 for an investment of £150. Remember that if X~ N(μ,0²) then exis lognormally distributed with parameters and o². You may use that for a standard normal random variable -¹(0.05) = -1.6449, where denotes the CDF.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
See similar textbooks
icon
Related questions
Question
5. Suppose we have a risky asset with random return R. We have defined R to be, S₁ - So So R = In = Now we introduce the log-return, which is defined as R = assume that R~ N(u, o²) where μ = 0 and o² = 0.1. µ (i) Show that ReR - 1. = So In this question, (ii) Calculate VaR0.95 for an investment of £150. Remember that if X ~ N(μ,0²) then exis lognormally distributed with parameters μ and o². You may use that for a standard normal random variable Þ−¹(0.05) = −1.6449, where Þ denotes the CDF.
Transcribed Image Text:5. Suppose we have a risky asset with random return R. We have defined R to be, S₁ - So So R = In = Now we introduce the log-return, which is defined as R = assume that R~ N(u, o²) where μ = 0 and o² = 0.1. µ (i) Show that ReR - 1. = So In this question, (ii) Calculate VaR0.95 for an investment of £150. Remember that if X ~ N(μ,0²) then exis lognormally distributed with parameters μ and o². You may use that for a standard normal random variable Þ−¹(0.05) = −1.6449, where Þ denotes the CDF.
Expert Solution
steps

Step by step

Solved in 4 steps with 25 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman
SEE MORE TEXTBOOKS