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Many of the Tools of Risk Management Can Be Developed Δ\Delta

Question 6

Multiple Choice

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 Δ\Delta 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 { Δ\Delta Et \le x}where Δ\Delta Et \equivΔ\Delta At - Δ\Delta Lt
B) computing Prob { Δ\Delta Et \le x}where Δ\Delta Et \equiv Δ\Delta At + Δ\Delta Lt
C) computing Prob { Δ\Delta At \le x}where Δ\Delta At \equiv Δ\Delta Et - Δ\Delta Lt
D) computing Prob { Δ\Delta Lt \le x}where Δ\Delta Lt \equiv Δ\Delta At - Δ\Delta Et
E) None of these answers are correct.

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