Interpretation

Question 1

VaR(Apsolut)

Answer 1

With a probability of …% the loss from owning … stocks of … over the next … business days will not be higher than €….

Question 2

Lower Partial Movment LPM:

Answer 2

LPMo=Probability of losing more that € is %
LPM1=If the loss is larger than €, it is larger by € on average.
LPM2=Interpretation: The average dispersion of shortfalls is €….

Question 3

Marginal VaR

Answer 3

If the risk position of X/Y increased by €1, the portfolio VaR would increase by € (€).

Question 4

Component VaRs

Answer 4

The Component VaR shows the contribution of each position to the VaR of the portfolio taking into account diversification effects. In sum, both Component VaRs are equal to the VaR of the portfolios.

Question 5

The Sharpe Ratio

Answer 5

The Sharpe Ratio of X is higher, it offers a better net return per unit of risk. Thus, the decision maker should invest in X.

Question 6

The RoRaC

Answer 6

The RoRaC for X is higher. For €1 of risk (VaR) X yields a net result of €… compared to €… for Y.

Question 7

risk-free strategy

Answer 7

The risk-free strategy would consist of buying X put options and writing X call options to complement the existing X stocks.

Question 8

The present values

Answer 8

The present values represent the current value of the bond in euros, and they have increased due to a decline in interest rates. The present value of the German (French) bond has experienced a significant rise in value.

Question 9

The modified durations

Answer 9

The modified durations indicate the sensitivity of the present value (bond price) to changes in market interest rates. The higher the duration, the more sensitive the bond price. A uniform rise (fall) in market interest rates by 1% would lead to an decrease (increase) in the price of the French bond by approximately 9.55% (German bond: only 2.79%).

Question 10

insurance contracts

Answer 10

A larger insurance collective leads to a smaller difference between actual and expected loss, a smaller contingency provision, and a smaller gross premium. Therefore, larger insurance companies can offer lower gross premiums.

Question 11

scoring model

Answer 11

1.Determination of factor weights through pairwise comparison:
a. The subjective preference structure
b. Pairwise comparison
2. Operationalisation of model
a higher score implies a lower risk.
A point value range of 0 to 20 is used
( The adjustment is necessary if one factor has a sum of zero.)

Question 12

y

Answer 12

h