1. Given below are data on investments.  Asset under management (AUM) in millions of dollars, expected rate of return, and standard deviation are given. 

 

Investment	AUM (M$)	Expected Return %	Standard deviation %
Omega	500	10	7
Beta	800	8	5
Gamma	600	12	9

 

Based on VaR criteria at 5% level, rank the three investments (best rank=1). 

Using Roy's safety first criteria, rank the three investments.  Assume R_L is 2%.

Assume an investor's utility function (U) is given as follows 

Transcribed Image Text:

U = R 2 50 U = R 2 50

Answer rating: 100% (QA)

To rank the three investments based on the Value at Risk VaR criteria at a 5 level we need to calculate the VaR for each investment and then rank them ... View the full answer