Assume that the daily Profit-and-Loss (PnL) are independent and identically

distributed, and they can exceed the risk limit

Q max 

with probability

p = 5%. 

 

(i) What is the probability that the limit will be exceeded 8 days in one

year (252 days) ?

(ii) What is the average number of times the risk limit will be exceeded

in one year (252 days)?

Answer rating: 100% (QA)

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