RSK4805 Assignment 4 (COMPLETE ANSWERS) 2024 - DUE September 2024 ; 100% TRUSTED Complete, trusted solutions and explanations.
RSK4805 Assignment 4 (COMPLETE ANSWERS) 2024 - DUE September 2024 ; 100% TRUSTED Complete, trusted solutions and explanations.
RSK4805 Assignment 4 (COMPLETE ANSWERS) 2024 - DUE September 2024 ; 100% TRUSTED Complete, trusted solutions and explanations.
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Market Risk Management
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RSK4805 Assignment
4 (COMPLETE
ANSWERS) 2024 - DUE
September 2024 ;
100% TRUSTED
Complete, trusted
solutions and
explanations.
ADMIN
[COMPANY NAME]
, RSK4805 Assignment 4 (COMPLETE ANSWERS) 2024 -
DUE September 2024 ; 100% TRUSTED Complete, trusted
solutions and explanations.
Q1 Suppose that each of two investments has a 4% chance of a
loss of R15 million, a 1% chance of a loss of R1.5 million and a
95% chance of a profit of R1.5 million. They are independent of
each other. Calculate the expected shortfall (ES) when the
confidence level is 95%? The expected shortfall for one of the
investments is the expected loss conditional that the loss is in the
5% tail. Given that we are in the tail, there is a Answer %
chance than the loss is R1.5 million and an Answer % chance
that the loss is R15 million. The expected loss is equal to R
Answer million. Round your answer to two decimal places (e.g.,
10.15 million)
Let's break down the problem step by step:
Given Information:
• Two investments, each with:
o 4% chance of a loss of R15 million
o 1% chance of a loss of R1.5 million
o 95% chance of a profit of R1.5 million
• Investments are independent.
• Confidence level: 95%
• Expected Shortfall (ES) is the expected loss given that the
loss occurs in the worst 5% of outcomes.
Step 1: Understanding the tail distribution
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