Suppose the return R on a stock satisfies R = +AY where u and X are...

 

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Suppose the return R on a stock satisfies R = μ+AY where u and X are fixed and Y has a t-distribution with degrees of freedom. (a) (5pt) If you hold So position in this stock, show that for a one day VaR(a)=-So(+ Xtav) where to is the ath quantile of a the t-distribution with degrees of freedon. (Hint: P(L> VaR(a)) = a and L = -SoR) (b) (5pt) If So= 100000, 0.04 and λ = 0.1, what is VaR(0.05) equal to if v = 10 = Suppose the return R on a stock satisfies R = μ+AY where u and X are fixed and Y has a t-distribution with degrees of freedom. (a) (5pt) If you hold So position in this stock, show that for a one day VaR(a)=-So(+ Xtav) where to is the ath quantile of a the t-distribution with degrees of freedon. (Hint: P(L> VaR(a)) = a and L = -SoR) (b) (5pt) If So= 100000, 0.04 and λ = 0.1, what is VaR(0.05) equal to if v = 10 =

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a Given R Y where Y t distribution with degrees of freedom Hold position S0 ... View the full answer