Value-at-Risk Theory and Practice

The first advanced book on value-at-risk

Chapter 2, Page 64
Exercise 2

Apply [2.26] to construct a quadratic polynomial approximation for the function about the point = (0,0).

Solution

Formula [2.26] provides a quadratic polynomial approximation p2(x) for the function f(x):

[2.26]

We have

[s1]

and

[s2]

Valuing f, , and at = (0,0), we obtain

f(0,0) = 0

[s3]
   
[s4]
   
[s5]

Substituting these into [2.26], our result is

[s6]

[s7]

 
 

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