Suppose that (X,Y) are the returns on two assets and have a multivariate t-distribution with degrees...
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Suppose that (X,Y) are the returns on two assets and have a multivariate t-distribution with degrees of freedom, mean vector, and covari- ance matrix V = 5, μ = 0.001 0.002 Σ = 0.03 0.10 0.03 0.15 Then R= (X+Y)/2 is the return on an equally weighted portfolio of the two assets. (a) What is the distribution of R? (b) Write an R program to generate a random sample of size 10,000 from the distribution of R. Your program should also compute the 0.01 upper quantile of this sample and the sample average of all returns that exceed this quantile. This quantile and average will be useful later when we study risk analysis. Suppose that (X,Y) are the returns on two assets and have a multivariate t-distribution with degrees of freedom, mean vector, and covari- ance matrix V = 5, μ = 0.001 0.002 Σ = 0.03 0.10 0.03 0.15 Then R= (X+Y)/2 is the return on an equally weighted portfolio of the two assets. (a) What is the distribution of R? (b) Write an R program to generate a random sample of size 10,000 from the distribution of R. Your program should also compute the 0.01 upper quantile of this sample and the sample average of all returns that exceed this quantile. This quantile and average will be useful later when we study risk analysis.
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a To determine the distribution of R we need to calculate its mean and var... View the full answer
Related Book For
Understanding Basic Statistics
ISBN: 9781111827021
6th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase
Posted Date:
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