A bank has written a European call option on one stock and a European put on another stock. For the first option, the stock price is 52, the strike price is 85, the volatility is 45% per annum, and the time to maturity is ten months. For the second option, the stock price is 32, the strike price is 18, the volatility is 36% per annum, and the time to maturity is 1 year. Neither stock pays a dividend, the risk-free rate is 2% per annum, and the correlation between stock returns is 0.8. a. Calculate a 10-day 97.5% VaR using only deltas. (4 marks) b. By how much does diversification reduce the 10-day 97.5% VaR? (2 marks)