Work the VaR Problem 9 of Chapter 2 assuming prices follow jump diffusion with normal sized jumps.

Question:

Work the VaR Problem 9 of Chapter 2 assuming prices follow jump diffusion with normal sized jumps.

Data given in problem 9

Find the VaR at the 99 % level over 2 months by simulation for a portfolio of two stocks with parameters: for the first: S0 = 20, μ =3 %, volatility= 26 %, for the second: S0 = 40, μ =1 %, volatility= 33 %. Assume that the stocks are correlated, variously, ρ = 0.9, ρ = 0.2, ρ = −0.8.

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

Step by Step Answer:

Related Book For  book-img-for-question

Finance With Monte Carlo

ISBN: 9781461485100

2013th Edition

Authors: Ronald W. Shonkwiler

Question Posted: