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Abank'strading portfolio, which is currently worth $150 million, is invested 30% in a stock fund (S), 40% in a bond fund (B), and 30% in
Abank'strading portfolio, which is currently worth $150 million, is invested 30% in a stock fund (S), 40% in a bond fund (B), and 30% in a precious metal (P). The daily standard deviation of returns is 2.5% for S, 1.5% for B, and 0.5% for P and the return correlation is 0.4 between S and B,-0.3 between S and P, and-0.1 between B and P. What is the 5-day expected shortfall for this portfolio based on a 5% tail loss probability assuming the returns for each asset class are normally-distributed and uncorrelated over time?
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