Discrete example

Market returns on 5 assets over a 1 year period.

Market conditions are equally likely (i.e. Prob of 1/3 for each)
Market Return (as %)

Condition
1
2
3

A
16
10
4

B
30
10
-10

C
15
8
7

D
9
6
3

Compute:
- expected return
- Variance of return
- Semi variance of return
- Shortfall probabilities Where L = 0, 6.5 and 8.5
Compute if probabilities are p1 = , p2 = 1/3, p3 = 1/6

Binomial & Poisson

Two assets are available for investment.
Asset 1 returns (4X) %, where Binomial (3, 0.5)
Asset 2 returns (2Y) %, where Poisson (3)
A benchmark return of 3% is required.
Calculate:
- expected return
- Variance of return
- Semi-variance of return, and
- Shortfall probability
...for each asset, given the above details.
State your choice of investment based on the calculations.

E
2
5
8