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12. Morricone Inc. has a position in a stock portfolio comprising the companies listed in Table 1. Correlation coefficients between stock returns are given in

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12. Morricone Inc. has a position in a stock portfolio comprising the companies listed in Table 1. Correlation coefficients between stock returns are given in the correlation matrix. Table 1 Stock Position (m) Daily Volatility 15 1.45% Eastwood Inc. Van Cleef Inc. 16 1.25% Wallach Inc. 12 1.1% Correlation Matrix Eastwood Van Cleef Eastwood 1 0.7 Van Cleef 1 Wallach Wallach 0.65 0.85 1 (a) Calculate the 5-day 95% value at risk (VaR) for the portfolio. (40 marks) (b) Calculate the 5-day 95% VaR for equivalent positions in the individual assets. (20 marks) (c) Explain and critically evaluate your results from parts (a) and (b). (40 marks) 12. Morricone Inc. has a position in a stock portfolio comprising the companies listed in Table 1. Correlation coefficients between stock returns are given in the correlation matrix. Table 1 Stock Position (m) Daily Volatility 15 1.45% Eastwood Inc. Van Cleef Inc. 16 1.25% Wallach Inc. 12 1.1% Correlation Matrix Eastwood Van Cleef Eastwood 1 0.7 Van Cleef 1 Wallach Wallach 0.65 0.85 1 (a) Calculate the 5-day 95% value at risk (VaR) for the portfolio. (40 marks) (b) Calculate the 5-day 95% VaR for equivalent positions in the individual assets. (20 marks) (c) Explain and critically evaluate your results from parts (a) and (b). (40 marks)

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