a) Assume a bank has a portfolio of stocks with a current market value of $4,000,000. If the recent volatility of the portfolio,
as measured by the standard deviation, is 3.3%, what is the estimated 10-day value at risk (VAR)
using a 95% level of confidence. Assume the returns are normally
Another bank has a long position of 3,000,000 in British pounds. The current exchange rate is $1.25/.
What is the 10-day VAR using a 95% level of confidence if the standard deviation has been estimated at 40 basis points?
Explain both results

b) Explain the difference between netting and aggregation in the estimation of VAR.