(i) Suppose that L1, L2 are identical independent random variables that fol- low the following pmf...

Transcribed Image Text:

(i) Suppose that L1, L2 are identical independent random variables that fol- low the following pmf J0.009 f(x) = x = 100 0.991 x = -5 Calculate VaR0.99 (+2), ES0.99 (L1+2). (ii) A risk measure p: MR is said to be convex, whenever p(AL₁ + (1 - λ)L2) ≤ Ap(L1) + (1A)p(L2) for all AE (0, 1) and L1, L2 E M. Is VaR0.99 convex? Is ES0.99 convex? (Hint: For VaR check the convexity property (with \ = ½) for the example given in part (i)) (i) Suppose that L1, L2 are identical independent random variables that fol- low the following pmf J0.009 f(x) = x = 100 0.991 x = -5 Calculate VaR0.99 (+2), ES0.99 (L1+2). (ii) A risk measure p: MR is said to be convex, whenever p(AL₁ + (1 - λ)L2) ≤ Ap(L1) + (1A)p(L2) for all AE (0, 1) and L1, L2 E M. Is VaR0.99 convex? Is ES0.99 convex? (Hint: For VaR check the convexity property (with \ = ½) for the example given in part (i))

Answer rating: 100% (QA)

i To calculate VaR099 12 and ES099 12 using the provided probability mass function pmf we need to fi... View the full answer