Question
Consider a position consisting of a $200,000 investment in Microsoft shares and a $300,000 investment in BP shares. Suppose that the daily volatilities of these
Consider a position consisting of a $200,000 investment in Microsoft shares and a $300,000 investment in BP shares. Suppose that the daily volatilities of these two assets are 0.95% and 1.02%, respectively, and that the coefficient of correlation between their returns is 0.56. What is the 10-day 97.5% value at risk for the portfolio? By how much does diversification reduce the VaR?
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Focus On Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert Hughes, Melissa Hart
6th Edition
125991965X, 978-1259919657
