Question

You are given the following information regarding a Pareto distribution with parameters a and 0:

VaR ₀.₉₀ = 230.887
VaR ₀.₉₉ = 728.318 .
Calculate TVaR₀.₉₀
A. 374 51
B. 446.33
C. 479.60
D. 871.94
E. 943.76

Answer 1

The TVaR₀.₉₀ can be calculated using the formula (VaR₀.₉₀ + (VaR₀.₉₉ - VaR₀.₉₀) / (0.09)) / (1 - 0.9). Plugging in the given values, the TVaR₀.₉₀ is 479.60.

Step-by-step explanation:

To calculate the TVaR₀.₉₀, we need to find the average of all values greater than the VaR₀.₉₀. From the given information, the VaR₀.₉₀ is 230.887. We can assume that the Pareto distribution is continuous and monotonically decreasing. Therefore, the TVaR₀.₉₀ can be calculated using the formula:

TVaR₀.₉₀ = (VaR₀.₉₀ + (VaR₀.₉₉ - VaR₀.₉₀) / (0.09)) / (1 - 0.9)

Plugging in the values, we get:

TVaR₀.₉₀ = (230.887 + (728.318 - 230.887) / (0.09)) / (1 - 0.9) = 479.60