Consider return distributions for two portfolios A and $B,$ with mean$=0$ and volatility$=1$ for both.

Portfolio $A^{\text{'}}\text{'}$s return distribution has a skewness$=-0\mathrm{.}75$ and kurtosis$=6\mathrm{.}06.$ Portfolio $B^{\text{'}}\text{'}$s distribution

has a skewness $=0$ and kurtosis$=3.$ Which one would you prefer?

Consider the following sequence of monthly returns on a portfolio: $-4\%,+5\%,+2\%,-7\%,+1\%,+0\mathrm{.}5\%,$

$-2\%,-1\%,-2\%,+5\%.$ What is the $80\%$ monthly CVaR for the portfolio?

Consider a portfolio with a $+\mathrm{.}5\%$ monthly expected return and $4\%$ monthly volatility. What is the

$95\%$ monthly Gaussian VaR for the portfolio?

Consider an asset with a skewness equal to $-1\mathrm{.}2$ and kurtosis equal to $6.$ Keeping in mind that the

critical value z$-$score for probability $95\%$ is $-1\mathrm{.}65,$ indicate what would be the modified critical value

for probability $95\%$ using the Cornish Fisher expansion.

Define drawdown. Based on this definition, explain whether it is a measure of downside risk and

why?

Assume the risk free rate is never negative. What is the Drawdown of an investment that returns the

risk free rate every month?