Explain simple and complicated formula of value at risk
Explain the difference between simple and complicated formula of value at risk.
Expert
The difference in between complicated and simple is essentially the difference among portfolios without derivatives and those with. If your portfolio only consists of linear instruments then computation involving normal distributions and standard deviations, all is done analytically. This is also the case when the time horizon is short therefore derivatives can be approximated through a position of delta in the underlying.
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Mr. James K. Silber, an avid international investor, sold a share of Rhone-Poulenc only, a French firm, for FF42. The share was bought for FF42 year ago. The exchange rate is FF6.15 per U.S. dollar and was FF6.65 per dollar a year ago. Mr. Silber acquired FF4
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