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claudia1 says

Ok Sir, you are perfectly correct of course. I forgot the part where 50 is deducted from 99. Thank you so much for the lecture. Understood.

claudia1 says

Hello Sir, half of 99 is 49.5, so should we be looking at .495 in the table?…just making sure.

bucheeri88 says

Hi Sir, I have a question relating to the normal distribution. Back in my earlier studies of normal distribution, when there is a 95% confidence level, we used to split the 5% (2.5% on each side). Same with a 97.5% confidence level (1.25% on each side). How come we only take the whole 5% on the negative side?

John Moffat says

Because we are only concerned about the amount being lower, not higher.

(You are referring to what is called a two-tail test, where the variable may be higher or lower. This is a one-tailed test.)

adlin says

Understood thank you

John Moffat says

You are welcome 馃檪

adlin says

I m confused as to what table he is referring to…?how did he get 1.645 value ?

John Moffat says

The normal distribution tables that are given to you in the exam (and that are printed in our free lecture notes). I do explain this in the lecture!

3403263nya says

Very understandable. Thank you.

said1988 says

Very happy with this lecture! Thanks a lot

John Moffat says

Thank you for your comment 馃檪

SamTallroth says

I just want to say thankyou, After watching the BPP lectures and reading the books I was confused still on Std Deviations. Your lecture has made it so much clearer.

John Moffat says

Thank you for for your comment 馃檪

herafatima says

Hi John, the concept has been well explained in the lecture, the assumption is the spread is a normal distribution and hence the graph is symmetrical and hence there is a 50% chance of the return being higher or lower than the average return. Our solution of the distance is based on this assumption.

In the exam, can they ask us to calculate the VAR, where the spread is asymmetrical?

John Moffat says

No, that is not possible. VaR always (in real life as well as in exams) assumes a normal distribution (which is symmetrical).

(That is one of the scary things about banks using it in real life (which they do!). Partly it is not necessarily normally distributed, but also even if it is and there is only a 1% chance of there being problems, that is 1 year in 100 and that 1 year could be next year 馃檪 )

herafatima says

Thanks, it is huge relief to know that. 馃檪

John Moffat says

You are welcome 馃檪