An investor holds a position that includes $100,000 invested in a 10-year Canadian government bond futures contract (CGB) and $100,000 invested in a Canadian stock index futures contract (SXF). Their annual volatility is 5 and 20 percent, respectively, with a correlation of "0.50. Assume that returns are normally distributed. VAR should be measured over 1 year at the 95 percent confidence level using the 1.645 quantile. Answer the following questions:
(a) What are the diversified VAR and undiversified VAR?
(b) What is the marginal and component VAR of CGB and SXF, respectively?
(c) What is the incremental VAR from setting CGB to zero?