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HI David,

1. If I have two portfolios : P1 with ES = ES1 at 95% confidance interval and P2 with ES = ES2 at 99% confidance interval.

How do we calculate the total Expected shortfall for the two portfolios.. Shall we convert 99% ES2 to 95% ( divide by 2.33 and multiply by 1.645) and add to 95% ES? Will they be linearly added? What if we have a correlation between the two portfolios?

2. I know Jorion says that while calculating VaR we should always take the absolute value of the portfolio ( irrespective of whether we are long or short).

If I have two portfolios

a) portfolio of long equities VaR1 and

b) portfolio of short equities VaR2

Then my total VaR should be VaR1-VaR2 because they are negatively correlated.. ( assume perfect negative correlation)

Am I correct?

Thanks,

Kavita

1. If I have two portfolios : P1 with ES = ES1 at 95% confidance interval and P2 with ES = ES2 at 99% confidance interval.

How do we calculate the total Expected shortfall for the two portfolios.. Shall we convert 99% ES2 to 95% ( divide by 2.33 and multiply by 1.645) and add to 95% ES? Will they be linearly added? What if we have a correlation between the two portfolios?

2. I know Jorion says that while calculating VaR we should always take the absolute value of the portfolio ( irrespective of whether we are long or short).

If I have two portfolios

a) portfolio of long equities VaR1 and

b) portfolio of short equities VaR2

Then my total VaR should be VaR1-VaR2 because they are negatively correlated.. ( assume perfect negative correlation)

Am I correct?

Thanks,

Kavita

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