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08 (10 points) XYZ Bank has a $10 million position in a five-year, zero-coupon bond witha face value of $13,382,256. The bond is trading at
08 (10 points) XYZ Bank has a $10 million position in a five-year, zero-coupon bond witha face value of $13,382,256. The bond is trading at a yield to maturity of 6 percent. The historical mean change in daily yields is 0.0 percent and the standard deviation is 10 basis points The bank has also determined that its inventory 10 million British pounds (E) is subject to market risk The spot exchange rate is S1.25/E The a's of the spot exchange rate of f, based on the daily changes of spot rates over the past six months, is 30 bp The bank also holds a $20 million trading position in stocks that reflect the U.S stock market index (eg, the StP s00). Over the last year, the on of the daily returns on the stock market index was 200 bp. The correlation coefficients between the bank's various asset groups are given below: (PSB -0.10 0.80 0.20 a b, what is the DEAR for the bond at 99% confidence level? what is the DEAR for British pound at 99% confidence level? what is the DEAR for the stock portfolio at 99% confidence level? d What is the DEAR for the bank's entire asset portfolio? e What is the bank's VaR for the next 10-day period
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