Value-at-Risk Theory and Practice

The first advanced book on value-at-risk

Chapter 3, Page 156
Exercise 41

Suppose Y equals a sum of 20 independent random variables. One is U(–10, 10). The rest are U(–1, 1). Is Y approximately normal?

Solution

The U(–10,10) random variable has a standard deviation that is 10 times that of the other random variables. It so dominates the sum that Y does not approximate a normal distribution. The PDF of Y is shown in the following exhibit.

 

 

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