Consider the Following Discrete Probability Distributions of Payoffs for 3

question 94

Multiple Choice

Consider the following discrete probability distributions of payoffs for 3 securities that are held in a DI's trading portfolio (payoff amounts shown are in $millions) : Based on your answers to the previous three questions, which of the following is true?

• A)Security Alpha represents the riskier of the two assets in the trading portfolio because there is a one-percent probability of loss the following day.
• B)Both securities have the same expected payoff; therefore, it makes no difference which is in the trading portfolio.
• C)Security Beta is the better asset to have in the trading portfolio since there is a 50 percent probability of a $400 payoff versus only $355 with security Alpha.
• D)Both securities have the same expected payoff and value at risk (VA
• R), therefore it makes no difference which is in the trading portfolio.
• E)According to the expected shortfall measure, if tomorrow is a bad trading day, losses will exceed $25 million.

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