Question
Consider a Single Asset Portfolio IBM: Assumption: CHF 10'000'000 Shares of IBM N = 10 (short fall or loss period) X = 99 (1% level
Consider a Single Asset Portfolio IBM:
Assumption:
CHF 10'000'000 Shares of IBM
N = 10 (short fall or loss period)
X = 99 (1% level of significance)
Assume 252 days of trading per year, volatility of 2% per day
Analyse data and assess VaR
Consider a second Single Asset Portfolio IMD, Lausanne :
Consider a position of CHF 5 Million on IMD, Lausanne
Daily volatility is 1% (approx. 16% per year) hence standard deviation of the change in
Portfolio in 1- day is CHF 50'000 (1% of 5 million)
Analyse and assess 10 day VaR at 99% Confidence Level
Now consider a 2 Asset case Portfolio (GBS and IMD Lausanne) :
Correlation between the 2 returns is 0.3 (ignore weights)
Use info from above
Analyse data and assess 10 day VaR at 1% level of significance
Question :
Compute in monetary terms the benefits of Portfolio diversification
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