J L FIR 4720/6720 Manage of Financial Institutions ven'ber 2018 VA Metrics Quiz#12 (10 points) Nanr'er ________ 1. Germantown Tennessee National Bank has detem'ined that its inventory of 40 nillion euros (f) is subject to market risk. The spot exchange rate on 1003/2018 is $1.1470l. The a of the spot exchange rate of the , based on the daily changes of spot rates over the past six n'onths. is 85 bp (085% or .0085). Determine the bank's 10-day Value at Risk (VAR) for Euros Use adverse rate changes in the 95'h percentile. 90% Confidence Interval, (Zm=1.6$. FX position of = 40.000.000*$1.1470/ = $45880 mllllm FX volatility we = 1.65x 8511p = 140.25 bp, or 1.4025 95 (Input into formula as: 0.014025) DEAR = ($Value of position) x (Price volatility) DEAR of = $______________________ VAR of =s_____ \"Xx/10:3 ________ 2 Germantown Tennessee National Bank also has a stodrportfolio with a market value of $40 million. The beta of the portfolio is 1.45; whereas, as we know, the market portfolio (B: I). The market portfolio's daily standard deviation (am) is estimated at 1.6 percent (Input into formula as: 0.016). What is the 5day VAR of this portfolio. using adverse rate changes in the 99th percentile, 98% Condence Interval, (25,2: 2.33) ? DEAR = ($Value of portfolio) x (szx Bx om) DEAR = ($Value of portfolio) x (233x Bx om) = s _________ VAR =8 ______ XJ5=$ _________ \\ . _ l'"' .._I - --- - ---________ 1. Germantown Tennessee National Bank has deternined that its inventory of 40 n'illion euros (IE) is subject to market risk. The spot exchange rate on 10l23lZOiB is $1.1470l6. The 0 of the spot exchange rate of the IE, based on the daily changes of spot rates over the past six months, is 85 bp (0.85% or .0085). Determ'ne the bank's 10day Value at Risk (VAR) for Euros. Use adverse rate changes in the 05'h percentile, 90% Confidence Interval, (thS). FX position of E = 640,000,000" $1.1470/IE = $45880 million FX volatility WC = 1.65 x85 bp = 140.25 hp, or 1.4025 96 (input into formula as: 0.014025 DEAR = (3 Value of position) x (Price volatility) DEAR of i = $____________________________ VARof =3 xJiO=$ 2 Germantown Tennessee National Bank also has a stock portfolio with a market value of $40 million. The beta of the portfolio is 1.45' whereas, as we know, the market portfolio (B= 1). The market portfolio's daily standard deviation (om) is estimated at 1.6 percent (input into formula as: 0.016). What is the 5-day VAR of this portfolio, using adverse rate changes in the 99'"I percentile, 98% Confidence interval, (Zw2=2.33) ? DEAR = ($ Value of portfolio) x (25;: x Bx om) DEAR = ($ Value of portfolio) x (2.33 x onm) = 3 VAR = 3 hi5 =3