Thread starter
#1

hello @David Harper CFA FRM

in the video related to P1.T2. Miller Chapter 2, you mentioned this question:

Assume the probability density function (pdf) of a zero-coupon bond with a notional value of $5.00 is given by f(x) = (3/125)*x^2 on the domain [0,5] where x is the price of the bond:

you asked to find the 95% value at risk (VaR)?

just I could not follow the following algebra answer steps:

f(x) = 3/125*x^2

them turn it to

f(x) = 3/125*1/3*x^3 = x^3/125 = p

then to

x = 1/3√125p = 5p^1/3

then to

For p = 5%,

x = 5(0.05)^1/3 = $1.8420

David, may you clarify the algebra issues here ?

thanks

in the video related to P1.T2. Miller Chapter 2, you mentioned this question:

Assume the probability density function (pdf) of a zero-coupon bond with a notional value of $5.00 is given by f(x) = (3/125)*x^2 on the domain [0,5] where x is the price of the bond:

you asked to find the 95% value at risk (VaR)?

just I could not follow the following algebra answer steps:

f(x) = 3/125*x^2

them turn it to

f(x) = 3/125*1/3*x^3 = x^3/125 = p

then to

x = 1/3√125p = 5p^1/3

then to

For p = 5%,

x = 5(0.05)^1/3 = $1.8420

David, may you clarify the algebra issues here ?

thanks

## Stay connected