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In its trading book, a U.S. bank holds (a) three equal-weighted industry portfolios, each portfolio worth $10 million and each comprised of twenty large cap
In its trading book, a U.S. bank holds (a) three equal-weighted industry portfolios, each portfolio worth $10 million and each comprised of twenty large cap stocks selected from local utilities, industrials, and basic materials sectors, and (b) three zero-coupon U.S. Treasury bonds, each on a $20 million face value, with remaining times to maturity of five, ten, and fourteen years. The Treasury yield curve is flat at 5% per year (EAR) for all horizons. Compute the minimum capital charge for equity and interest rate risk.
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