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Unformatted text preview: which can be calculated based on Z-table 4.4 Two types of problems related to normal distribution a. Find probability , i.e P(X>10)=? Where X-N(10,100) b. Find limit boundary: i.e. P(X>a)=95% , find a . An important application in finance is to find Value at Risk (VaR) . In the example above, “a” is VaR at the level of 95% . If X denote the firm cashflow, it implies the firm value will exceed “a” with probability of 95% ) ( σ μ − < < − b z a P...
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This note was uploaded on 09/15/2008 for the course ISMT 111 taught by Professor Wanxuhu during the Fall '08 term at HKUST.
- Fall '08