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1.65? what
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U didnt tell the sd which is 4.85 in the question and mean is 50million
So,
as 95% is probability level so 5% or ..05 is the chance of that happening which is given by .5-y=.05 y is the value in the table so y =.5-.05=.45 see the closest of .o5 which happens to be at 1.65 and as we subtracted from .5 so -1.65
as we know x-50/sd=-1.65 now u can find x ..rest is easy i guess- Topics: 0
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I guess i did not explain well 🙂
consider this example
Value of business is 50 million what is the probability that it will fall to 42 million if standard distribution is 4.85 million..
what would u do 50 million – 42 million = 8 million
as SD is 4.85 as our difference is 8 million so that is equal to
8/4.85=1.65 :: see: 50-42/4.85=1.65 or 42-50/4.85=-1.65 now we look this 1.65 in normal distribution table… which gives .4505 now .5-.4505= 5%approx in your question this 5% is given and u have to work back to find 42 mentioned above as x ..got it???- Topics: 0
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Var=50-42 =8 here and the probability of that happening is 5%
VaR was at previous exam.. I dont think there is a big chance it to come out again
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yep… Value at Risk was tested in the last examination session but it is not an excuse for retest that in the coming examination session, Examinaer has mentioned if the students’ performance are less she will be continue to test on that particular area.
Value at Risk (VaR) is giving the maximum possible risk at given confidence level for a given period of time. -1.65% for 95% of confidence level is calculated as follows.
At 95% confidence there is 5% chance that the maximum possible risk will be more than the VaR figure,
N(d1) = 0.05 then d1 has to be -0.4500
using Normal SD table, you will find that 0.4500 is equals to -1.65
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