1. An FI has $100 000 of net positions outstanding in UK pounds () and $30 000...

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1. An FI has $100 000 of net positions outstanding in UK pounds (£) and −$30 000 in Swiss francs (SF). The standard deviation of the net positions as a result of exchange rate changes is 1 per cent for the £ and 1.3 per cent for the SF. The correlation coefficient between the changes in exchange rates of the £ and the SF is 0.80.

What is the risk exposure to the FI of fluctuations in the £/$ rate?

What is the risk exposure to the FI of fluctuations in the SF/$ rate?

What is the risk exposure if both the £ and the SF positions are combined? LO 13.4, 13.5

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