3.

Consider a portfolio containing FirmXand FirmY.We obtain the 10-day 99% VaR for both firms separately. We also compute the VaR for the portfolio whenthere exists a perfect negative correlation between the firm returns. What will be the benefits of diversification?

Choose one:

a.0

b.Maximum benefits

c.Minimum benefits

d.We need the information on the volatilities of these two firms to estimate the benefits of diversification.

e.1

f.We need further information on the correlations of these two firms to estimate the benefits of diversification.

g.1000