RSK4805 Assignment 4 (QUESTIONS & ANSWERS) 2024

RSK4805 Assignment 4 Full Solutions 2024 ;100 % TRUSTED workings, Expert Solved, Explanations and Solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... 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 10-year zero-coupon bond with a face value of $7,000. Portfolio B consists of a 5.95-year zero-coupon bond with a face value of $4,500. The current yield on all bonds is 10% per annum (continuously compounded). The value of Portfolio B is Answer. Enter to 2 decimal places (e.g. 2.34) The percentage change for a 3.5% per annum increase in yield for Portfolio B will (increase/decrease) Answer increasedecrease the value The percentage change for a 3.5% per annum increase in yield for Portfolio B will change the value by Answer. Enter to 2 decimal places (e.g. 2.34)