Greg Lawrence is a risk analyst at ES Bank. After estimating the 99%, one-day VAR of the bank's portfolio using historical simulation with 1,200 past days, he is concerned that the VAR measure is not providing enough information about tail losses. He decides to reexamine the simulation results. Sorting the simulated daily P&L from worst to best gives the following results:
|
Rank
|
1
|
2
|
3
|
4
|
5
|
6
|
|
P&L
|
-2,833
|
-2,333
|
-2,228
|
-2,084
|
-1,960
|
-1,751
|
|
Rank
|
7
|
8
|
9
|
10
|
11
|
12
|
|
P&L
|
-1,679
|
-1,558
|
-1,542
|
-1,484
|
-1,450
|
-1,428
|
|
Rank
|
13
|
14
|
15
|
|
5
|
6
|
|
P&L
|
-1,368
|
-1,347
|
-1,319
|
|
-1,960
|
-1,751
|
What is the 99%, one-day expected shortfall (ES) of the portfolio?
A. USD 433
B. USD 1,428
C. USD 1,861
D. USD 2,259