4. What are 95% and 99% 1-, 10-, and 20-dayVaRs for a portfolio that has $4m invested...

Question:

4. What are 95% and 99% 1-, 10-, and 20-dayVaRs for a portfolio that has $4m invested in stock A, $3.5m in stock B, and $2.5m in stock C?

assume that the risk-free rate is 0.08 and that there are three stocks with a price of $100 and the following characteristics:

α σ δ Correlation with B Correlation with C Stock A 0.15 0.30 0.00 0.25 0.20 Stock B 0.18 0.45 0.02 1.00 0.30 Stock C 0.16 0.50 0.00 0.30 1.00

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Derivatives Markets Pearson New International Edition

ISBN: 978-1292021256

3rd Edition

Authors: Robert L. Mcdonald

See More Books

Question Posted: Jul 22, 2024 09:00 AM

See More Questions

A semicircular plate of radius r, oriented as in the figure, is submerged in fluid of density 68 lb/ft 3 so that its diameter is located at a depth of m feet. Calculate the force on one side of the...
Quorum sensing is a process used by many bacteria for communication. It involves the production of molecules called auto inducers, which act as bacterial chemo attractants. Describe how a motile...
A medical researcher estimates that .00004 of the population has a rare blood disorder. If the researcher randomly selects 100, 000 people from the population, a. What is the probability that seven...
P135 Dividend constraints A firm has $800,000 in paid-in capital, retained earnings of $40,000 (including the current years earnings), and 25,000 shares of common stock outstanding. In the current...
On January 1, 2013, Pam Company purchased an 85% interest in Shaw Company for $540,000. On this date, Shaw Company had common stock of $400,000 and retained earnings of $140,000. An examination of...
1. 2. 3. What is the valuation problem here? In what currency are the cash flows denominated? In what currency should the discount rate be denominated? In this case, why doesn't J.P. Morgan discount...
3. Assuming a $10m investment that is 40% stock A and 60% stock B, compute the 95% and 99% VaR for the position over 1-day, 10-day, and 20-day horizons. assume that the risk-free rate is 0.08 and...
5. Using the same assumptions as in Example 3, compute VaR with and without the mean, assuming correlations of 1, 0.5, 0, 0.5, and 1. Is risk eliminated with a correlation of 1? If not, why not?...
20.3. What type of firm would you prefer to work for: a diversified firm or a very focused firm? What does your answer to the above question tell you about one of the advantages or disadvantages of...
The following events apply to Tops Gift Shop for 2012, its first year of operation: 1. Acquired $\$ 45,000$ cash from the issue of common stock. 2. Issued common stock to Kayla Taylor, one of the...
Indicate whether each of the following costs is a product cost or a period (selling and administrative) cost. a. Transportation-in. b. Insurance on the office building. c. Office supplies. d. Costs...
Refer to the information presented in M7-9. Suppose that Juanita has developed a rectangular, medium-size ceramic pot. It requires 3 hours of kiln time; however, two medium-size pots can fit m the...
Eclipse Company manufactures a variety of sunglasses. Production information for its most popular line, the Total Eclipse (TE), follows: Suppose that Eclipse has been approached about making a...
Sunblocker Corp. makes several varieties of beach umbrellas and accessories. It has been approached about producing a special order for custom umbrellas. The special-order umbrellas with the Randolph...
Find the increment of the ice melting temperature in the vicinity of 0 C when the pressure is increased by p = 1.00 atm. The specific volume of ice exceeds that of water by V ' = 0.091 cm3/g.
Select a mass spectrometric technique with the highest mass resolution for identifying an unknown compound being eluted from a liquid chromatography column
Dr. Claudia Gomez, a plastic surgeon, had just returned from a conference in which she learned of a new surgical procedure for removing wrinkles around eyes, reducing the time to perform the normal...
QUESTION 2 ( 2 0 Marks ) 2 . 1 REQUIRED Study the information provided below and prepare the Income Statement for the year ended 3 1 December 2 0 2 3 using the marginal costing method. INFORMATION...
During its first year of operations, Splish Brothers inc. had these transactions pertaining to its common stock. Jan. 10 Issued 41,500 shares for cash at $6 per share. fuly 1 issued 71,500 shares for...

4. What are 95% and 99% 1-, 10-, and 20-dayVaRs for a portfolio that has $4m invested...

Question:

Step by Step Answer:

Derivatives Markets Pearson New International Edition

Students also viewed these Business questions