1. Due to the increase in market risk, the bank is considering the possible restructuring of its trading portfolio. Currently, the portfolio consists of three-year zero coupon bonds with a daily earnings at risk (DEAR) of $10,000, Foreign exchange contracts with a DEAR of $15,000 and shares with a DEAR of $20,000. The bank has to determine the DEAR of the portfolio to consider the impact that it can have on the financial position of the bank if the market shows the following current correlations (_ij) among the assets:

	Three-year zero-coupon	Foreign exchange contracts	Shares
Three-year, zero-coupon bonds	C	0.1	0.3
Foreign exchange contracts	C	C	0.4
Shares	C	C	C

Calculate the DEAR for the trading portfolio for the Head of the Division. (10 marks)