Value-at-Risk Theory and Practice

The first advanced book on value-at-risk

Chapter 3, Page 140
Exercise 29

Suppose X ~ N(2, .09). Use a standard normal table to determine the .90-quantile −1(.90) of X.

Solution

Let Z ~ N(0,1) such that:

[s1]

[s2]

From the standard normal table, the .90-quantile of Z is 1.28, so

[s3]

[s4]
[s5]

Accordingly, the .90-quantile −1(.90) of X is 2.38.

A more direct and intuitive solution is to recognize that the .90-quantile of any normal distribution occurs 1.28 standard deviations above its mean. Accordingly, the .90-quantile of X is

[s6]

 

 

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