Suppose that a one-year project that requires an initial investment of $5 million has a 65% chance of generating $12 million income, a 5% chance of generating $7 million income, a 10% chance of generating $3 million income and a 20% chance of generating nothing. In what way the VaR is inferior to the Expected Shortfall as a risk measure?

Suppose that a one-year project that requires an initial investment of $5 million has a 65% chance of generating $12 million income, a 5% chance of generating $7 million income, a 10% chance of generating $3 million income and a 20% chance of generating nothing. In what way the VaR is inferior to the Expected Shortfall as a risk measure?

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 10CQ

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