Bank A's risk manager has estimated that the Value-at-Risks (VaRs) of two of its major assets in its trading portfolio, foreign exchange and bonds are -150,000 and -250,000, respectively.

(a) What is the total 1-day VaR of Bank A's trading portfolio if the correlation between assets is ignored?

(b) What is the total 1-day VaR of Bank A's trading portfolio if the assets are assumed to have a perfectly positive correlation? How does the total 1-day VaR change if the assets are not correlated? Discuss how the degree of correlation between two assets can affect the 1-day VaR of Bank As trading portfolio.

(c) What is the 10-day VaR of Bank A's trading portfolio if the correlation between assets is assumed to be -1.0?

(d) Discuss how a positive degree of autocorrelation can affect the 10-day VaR.