Question

Value at Risk (VAR) has become a key concept in financial calculations. The VAR of an investme nt is define as that value v such that there only a 1 percent chance that the liss from the investment will be greater than v. a). If the gain from an investment is a normal random variable with mean 10 and variance 49 determine the VAR. ( If X is the gain, then -X is the loss). d). Among a set of investment all of whose gains are mormally distributed, show that the one having the smallest VAR is the one having the largest value of mean - 2.33 variance of the gain from the investment.

Find z0.07

Answer 1

1341 ablutions @ Given Moon () = 10 Variance (62)=49 .:. Standaod deviation (6): 149 : 7 for ly. the critical value of a 18 20.012 -20. 33 P(x <fo):00) PC < 20-4)= 0.01 P(22 7010).-0-01 P2 < -2.83):0.01 : 20-10 :-2-33 - 20-10 : -16.31 4--16-3)+10 Thus, there is only ly foss from invest ment choree that x is is greates than [26: -6.31 less thon -6.3), of the 6.3): 6) W.K.7 V = all - 2.33x6 AOwo 20.0t 14458 ( from critical value of ).