Financial Risk Manager Part 2

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Explanation:

First, we calculate normal expected loss:

\text{Normal EL} = 7,000,000 \times 0.06 \times (1 - 0.8) + 9,000,000 \times 0.05 \times (1 - 0.9) = 129,000

Then, we calculate stressed expected loss:

\text{Stressed EL} = 7,000,000 \times 0.12 \times (1 - 0.8) + 9,000,000 \times 0.18 \times (1 - 0.9) = 168,000 + 162,000 = 330,000

The stress loss is the difference between the stressed EL and normal EL:

\text{Stress Loss} = 330,000 - 129,000 = 201,000

Explanation:

First, we calculate normal expected loss:

\text{Normal EL} = 7,000,000 \times 0.06 \times (1 - 0.8) + 9,000,000 \times 0.05 \times (1 - 0.9) = 129,000

Then, we calculate stressed expected loss:

\text{Stressed EL} = 7,000,000 \times 0.12 \times (1 - 0.8) + 9,000,000 \times 0.18 \times (1 - 0.9) = 168,000 + 162,000 = 330,000

The stress loss is the difference between the stressed EL and normal EL:

\text{Stress Loss} = 330,000 - 129,000 = 201,000

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Last updated: July 5, 2026 at 07:14

$51,094.6

$330,000

$362,755.4

$201,000