Exercise 2.4 Given the following portfolio - One unit of stock S with initial value $100 - $50 in a money market (MM) risk-free account (Risk-free) - One 3-year Put option with strike of 40. - $50 in a 10- year 3% par yield government bond Other assumptions - Risk free rate term structure of 3% flat - Model as a Vasicek process with a=0.10 and sigma =0.01 - Stock Real World (RW) growth rate of 8% - Stock RW volatility of 15% - Implied volatility of 20%, flat term structure and no skew - 30% correlation between stock return and change in rates Simulate 100 RW scenarios and calculate the following. a) What is the mean, median, std dev, VaR(90%), and Expected Shortfall (90\%) of this portfolio in 1 year? b) What is the mean, median, std dev, VaR, and Expected Shortfall of the same portfolio if you rebalance the Stock, MM, and Bond to the 50%/25%/25 weights? Exercise 2.4 Given the following portfolio - One unit of stock S with initial value $100 - $50 in a money market (MM) risk-free account (Risk-free) - One 3-year Put option with strike of 40. - $50 in a 10- year 3% par yield government bond Other assumptions - Risk free rate term structure of 3% flat - Model as a Vasicek process with a=0.10 and sigma =0.01 - Stock Real World (RW) growth rate of 8% - Stock RW volatility of 15% - Implied volatility of 20%, flat term structure and no skew - 30% correlation between stock return and change in rates Simulate 100 RW scenarios and calculate the following. a) What is the mean, median, std dev, VaR(90%), and Expected Shortfall (90\%) of this portfolio in 1 year? b) What is the mean, median, std dev, VaR, and Expected Shortfall of the same portfolio if you rebalance the Stock, MM, and Bond to the 50%/25%/25 weights