Raroc practice question

john.ophof

dra. Ing
Returns are nomally distributed.

Bond Trader with an After-tax profit of 8, Net book Market Value of 120, Weekly volatility 1.1%, Tax Rate.

What is RAROC for the bond trader.

In the answer they divide 8 by VAR. In the question there was no confidence interval but it must be 99 (z 2.33).
I think this question is not okay since Expected loss is excluded here.

84.92% is the answer.

John
 
Top