GARP.FRM.PQ.P2 Surplus Value GARP 2015 Question 5 (garp15-p2-5)

[David Harper CFA FRM]

Hi @anisapassfrm I think 100*0.06-90*0.07 = -0.3 is the expected change in surplus, ΔS, such that 10 surplus - 0.3 = +9.7 is the expected surplus. Thanks,

 

[winveeraphan]

Dear David,

How could we know whether we should use "expected change in surplus" or "expected surplus" for SaR calculation?

Thank you.

 

[David Harper CFA FRM]

Hi @winveeraphan I'm not sure exactly what you mean ... as I illustrated above (in the embedded quote), given that surplus at risk (SaR) can be "absolute" (ie, relative to the the initial surplus) or "relative" (ie, relative to the expected future surplus) or even relative to zero surplus (aka, worst expected shortfall), I think the burden is on the question to be specific about exactly which SaR is sought.

 

[winveeraphan]

Thank you.