CAS Exam 9 Spring 2019, Question 19
Study guide: Exam 9
A company uses the following leverage ratio formula to determine a risk load based on events with loss, x, exceeding the 99.5th percentile:
L(x) = \frac{(1.25 \text{ when } x > x_{0.995}, \text{ else } 0)}{1 - 0.995}
1,000 events are simulated with a mean loss of $50,000:
| Simulated Event | Loss (in 000s) |
|---|---|
| 1,000 | 100 |
| 999 | 93 |
| 998 | 88 |
| 997 | 81 |
| 996 | 77 |
| 995 | 76 |
| 994 | 74 |
| 993 | 73 |
| 992 | 71 |
| 991 | 58 |
Calculate the total required capital.
Part a (1.25 points)
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