ABC Bank believes that the underlying distribution of its loan returns should follow a normal distribution with a mean of 10 and a standard deviation of 3. The following table identifies tail VARs at different confidence levels. Assume the initial analysis uses five tail slices. Calculate the expected shortfall at the 97% confidence level and identify the effect on ES when the number of tail slices increases.
　　Confidence level    Tail VAR
　　95%                  3.00
　　96%                  3.25
　　97%                  3.60
　　98%                  4.00
　　99%                  4.75
　　Expected Shortfall   Increasing Slices
　　A.         4.117           ES increases
　　B.         4.117           ES decreases
　　C.         4.375           ES increases
　　D.         4.375           ES decreases
　　Answer: C
　　The expected shortfall calculation takes the average of the expected shortfalls at varying confidences in the tail region. Note that the tail VAR at 97% is not included in the calculation since ES is the average loss beyond 3% VAR. In addition, as the number of tail slices increases, the average ES will increase as the number of higher confidence tail VARs increases.
 　　FRM官方微信　　
　　掃一掃微信，*9時間獲取2014年FRM考試報名時間和考試時間提醒
　　
　　高頓網(wǎng)校特別提醒：已經(jīng)報名2014年FRM考試的考生可按照復(fù)習(xí)計劃有效進行！另外，高頓網(wǎng)校2014年FRM考試輔導(dǎo)高清課程已經(jīng)開通，通過針對性地講解、訓(xùn)練、答疑、?？?，對學(xué)習(xí)過程進行全程跟蹤、分析、指導(dǎo)，可以幫助考生全面提升備考效果。
　　報考指南：2014年FRM考試報考指南
　　免費題庫：2014年FRM考試免費題庫
　　考試輔導(dǎo)：FRM考試招生專題
　　高清網(wǎng)課：FRM考試網(wǎng)絡(luò)課程