Meaning of Monotonically decreasing

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

Meaning of Monotonically decreasing

Postby AMITAG1990 » Fri Nov 02, 2012 6:51 pm

Question.
Portfolio A has a 1-day, 95% VaR of $5 million. Portfolio B has a 1-day, 95% VaR of $7 million. Is it possible for the 1-day, 95% VaR of the combined portfolio (A + B) to be greater than $12 million?
Choose one answer.
a. Yes, but only if the loss distribution for one portfolio is skewed to the right, and the loss distribution for the other is skewed to the left
b. No, never
c. Yes, but only if the positions in the two portfolios are perfectly correlated
d. Yes, but only if the tails of the loss distributions for A and B are not monotonically decreasing


-please explain me what is a meaning of monotonically decreasing, given in option D.

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prasad.ajinkya
Posts: 7
Joined: Sat Feb 11, 2012 8:36 pm

Re: Meaning of Monotonically decreasing

Postby prasad.ajinkya » Sat Nov 03, 2012 5:42 pm

Monotonically decreasing means that it is decreasing consistently.

As in, at no point in time will it suddenly peak (increase).

content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: Meaning of Monotonically decreasing

Postby content.pristine » Tue Nov 06, 2012 1:32 pm

Thanks Prasad! 8-)


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