FI semivariance

Shortfall measures probability it doesnt give u a number
comp_sci_kid Wrote:
——————————————————-
> volkovv Wrote:
> ————————————————–
> —–
> > but shortfall also seemed correct, it does
> measure
> > probability of not making your target if lets
> say
> > you use 2 std shortfall, then you can say you
> are
> > 95% sure you at least get that target
>
>
> shortfall doesnt measure PROBABILITY it gives you
> the number. not probability
 
comp_sci_kid Wrote:
——————————————————-
> volkovv Wrote:
> ————————————————–
> —–
> > but shortfall also seemed correct, it does
> measure
> > probability of not making your target if lets
> say
> > you use 2 std shortfall, then you can say you
> are
> > 95% sure you at least get that target
>
>
> shortfall doesnt measure PROBABILITY it gives you
> the number. not probability
no short fall is a probability
 
comp_sci_kid Wrote:
——————————————————-
> volkovv Wrote:
> ————————————————–
> —–
> > but shortfall also seemed correct, it does
> measure
> > probability of not making your target if lets
> say
> > you use 2 std shortfall, then you can say you
> are
> > 95% sure you at least get that target
>
>
> shortfall doesnt measure PROBABILITY it gives you
> the number. not probability
I think you might have those mixed up, shortfall risk is a probability, VAR is a absolute number, but does not give a magnitude of loss beyond that number.
 
“The amount by which the capital required to fulfill a financial obligation exceeds available capital.”
From investopedia
 
yes, if you use exp.return - 2 stdev… that is a performance level, not a probability. is like var
 
I realized it. In fact, VAR does not give you the magnitude of any loss below a number. That’s why there is an extension called Tail Value VAR. Anyway, I will accept the defeat on this one whatever the correct answer CFAI thinks it is.
equity_research_nds Wrote:
——————————————————-
> bluelily Wrote:
> ————————————————–
> —–
> > Does VAR measure risk in money terms? Somehow,
> I
> > didn’t think it was right either. It says VAR
> > measures loss in money terms but does not give
> the
> > magnitude of the worst possible loss.
>
>
> I agree with the stmnt it doesnt tell u the most u
> will loose in worst case scenario….. shortfall
> probabilty also doesnt tell u in monetary terms
> how much u will lose…it just tells u the
> probabilty of it….
>
> however u cant use semi-variance for a portfolio
> which includes options coz of thier non-linear
> payoffs….
 
Shortfall takes an expected return and a standard deviation and calculates the area under the normal curve corresponding to the risk of not meeting a specific target. If the curve is not normal, you have to use a different probability distribution, perhaps pulled from historical data, but remainder the method is the same.
 
if u guys feel u can use semi-variance for an options portfolio can anyone explain me the downside risk for a portfolio with call options?
 
of course, the call option is on the issuer side.
equity_research_nds Wrote:
——————————————————-
> if u guys feel u can use semi-variance for an
> options portfolio can anyone explain me the
> downside risk for a portfolio with call options?
 
I think the semivariance was asked for a pordfolio with asymmetric returns. ANd it was fine.
 
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