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RSK4805 ASSIGNMENT 4 (COMPLETE
ANSWERS) 2024 - DUE SEPTEMBER 2024
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RSK4805 Assignment 4 (COMPLETE ANSWERS) 2024 -
DUE September 2024
Ass 4 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) Q2 1. Suppose we estimate the one-day 97.5% VaR from
1,100 observations as 5 (in millions of dollars). By fitting a
standard distribution to the observations, the probability density
function of the loss distribution at the 97.5% point is estimated to
be 0.04. The standard error of the VaR estimate is $Answer
million. Round your answer to two decimal places (e.g., 0.15
million) 2. A financial institution owns a portfolio of options
dependent on the US dollar–sterling exchange rate. The delta of
the portfolio with respect to percentage changes in the exchange
rate is 6.5. If the daily volatility of the exchange rate is 0.5% and
a linear model is assumed. The estimated 10-day 99% VaR is
$Answer. Round your final answer to four decimal places (e.g.,
0.3456) Q3 Suppose that the change in the value of a portfolio
over a one-day time-period is normal with a mean of zero and a
standard deviation of $5 million. 1. The one-day 97.5% VaR is
$Answer million. Round your answer to two decimal places (e.g.,
12.23 million) 2. The five-day 97.5% VaR is $Answer million.
Round your answer to two decimal places (e.g., 12.23 million) 3.
The five-day 99% VaR is $Answer million. Round your answer to
two decimal places (e.g., 12.23 million) Q4 Portfolio A consists
of a one-year zero-coupon bond with a face value of $3,000 and a
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