Many of the tools of risk management can be developed by focusing on computing a loss distribution.Denote the time t value of a firm's assets,liabilities,and equity by At,Lt,and Et,respectively.If denotes a change in these quantities,and x denotes a predetermined value,then the risk measurement problem may be set up as:
A) computing Prob { Et x}where Et At - Lt
B) computing Prob { Et x}where Et At + Lt
C) computing Prob { At x}where At Et - Lt
D) computing Prob { Lt x}where Lt At - Et
E) None of these answers are correct.
Correct Answer:
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