Why is traditional, simple VaR measurement not coherent
Why is traditional, simple VaR measurement not coherent?
Expert
The traditional, simple VaR measure is not coherent because it does not satisfy the sub-additivity condition. Sub-additivity is an evident requirement for a risk measure; or else there would be no risk benefit to adding uncorrelated new trades in a book. When you have two portfolios X and Y so then this benefit can be explained as
ρ(X) + ρ(Y) − ρ(X + Y).
Explain the important properties of Brownian motion.
Explain an example of Brownian motion, where it is used.
Explain an example of Margin Hedging in Metallgesellschaft and Long Term Capital Management.
Alpha and Beta Companies can borrow at the described rates. &nbs
What is Crash (Platinum) hedging?
How is a country's economic well-being increased through free international trade in goods & services?According to David Ricardo, along with free international trade, this is mutually beneficial for two countries to each specialize in the pr
Explain the terms: diversifiable and non-diversifiable risk. Which one is more important to financial managers in business firms?
Explain the relationship between the European calls, puts value with similar strike and expiration value.
What is MCC (marginal cost of capital schedule)? The schedule is always a horizontal line. Elaborate.
What are the reasons that Inventory is sometimes thought of as a needed evil.
18,76,764
1936070 Asked
3,689
Active Tutors
1412710
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!