hellohi
Active Member
hello @David Harper CFA FRM
in the video related to P1.T2. Miller Chapter 2, you mentioned this question:
Assume the probability density function (pdf) of a zero-coupon bond with a notional value of $5.00 is given by f(x) = (3/125)*x^2 on the domain [0,5] where x is the price of the bond:
you asked to find the 95% value at risk (VaR)?
just I could not follow the following algebra answer steps:
f(x) = 3/125*x^2
them turn it to
f(x) = 3/125*1/3*x^3 = x^3/125 = p
then to
x = 1/3√125p = 5p^1/3
then to
For p = 5%,
x = 5(0.05)^1/3 = $1.8420
David, may you clarify the algebra issues here ?
thanks
in the video related to P1.T2. Miller Chapter 2, you mentioned this question:
Assume the probability density function (pdf) of a zero-coupon bond with a notional value of $5.00 is given by f(x) = (3/125)*x^2 on the domain [0,5] where x is the price of the bond:
you asked to find the 95% value at risk (VaR)?
just I could not follow the following algebra answer steps:
f(x) = 3/125*x^2
them turn it to
f(x) = 3/125*1/3*x^3 = x^3/125 = p
then to
x = 1/3√125p = 5p^1/3
then to
For p = 5%,
x = 5(0.05)^1/3 = $1.8420
David, may you clarify the algebra issues here ?
thanks