A financial institution owns a portfolio of options on the U.S. dollarsterling exchange rate. The delta of
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A financial institution owns a portfolio of options on the U.S. dollar–sterling exchange rate. The delta of the portfolio is 56.0. The current exchange rate is 1.5000. Derive an approximate linear relationship between the change in the portfolio value and the percentage change in the exchange rate. If the daily volatility of the exchange rate is 0.7%, estimate the 10-day 99% VaR.
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