Value-at-Risk Theory and Practice

The first advanced book on value-at-risk

Chapter 2, Page 64
Exercise 1

Apply [2.17] to construct a quadratic polynomial approximation for the function about the point = 0.

Solution

Formula [2.17] provides a quadratic polynomial approximation p2(x) for the function f(x).

[2.17]

We have

[s1]

so
[s2]
   
[s3]

Valuing [s1], [s2], and [s3] at = 0, we obtain values 0, 1, and 2 respectively. Substituting these values into [2.17], we obtain the quadratic approximation

[s4]

 

 

website: http://www.contingencyanalysis.com
value-at-risk direct link: http://www.value-at-risk.net
copyright © Contingency Analysis, 2003