ILA LRM Fall 2014 #2(b)

(b) (3 points) Given the following loss distributions:



X

=5 with a probability of 0.800

=80 with a probability of 0.170

=500 with a probability of 0.030



Y

=10 with a probability of 0.850

=120 with a probability of 0.145

=2000 with a probability of 0.005



Calculate the 95% VaR and 95% CTE for X+Y, assuming X and Y are

independent. Show all work.



How is the distribution X+Y is obtained?



Thanks in advance.

ILA LRM Fall 2014 #2(b)