Certain Equivalent of a Portfolio: Approximate Expression An exponential investor with a risk tolerance equal to $20000 faces the following two deals [0.25, -20000; 0.5, 0; 0.25, 30000] and [0.25,...

Certain Equivalent of a Portfolio: Approximate Expression

An exponential investor with a risk tolerance equal to $20000 faces the following two deals

[0.25, -20000; 0.5, 0; 0.25, 30000] and [0.25, -5000; 0.5, 0; 0.25, 5000]

a. Using the approximate expression, calculate his certain equivalent for the deals if they are

i. Mutually Irrelevant

ii. Positively correlated with a correlation coefficient equal to 0.8

iii. Negatively correlated with a correlation coefficient of -0.6

b. Calculate his optimal share in each deal for the three case of partial.

c. Calculate the certain equivalent of the optimal share in each case