Investment A has 3% chance of a loss of $5 million, a 4% chance of a loss of $2 million and a 93% chance of a gain of $1 million.

 Investment B will provide a gain that is normally distributed with a mean of $1 million and standard deviation of 2 million. 

The investments are independent. 

Calculate the value at risk and expected shortfall for each investment. 

What is the value at risk for a portfolio consisting of the two investments with a confidence level of 95%? Does Value at risk satisfy the subadditivity condition in this case?

Answer rating: 100% (QA)

To solve this problem we need to calculate the value at risk VaR and expected shortfall ES for each ... View the full answer