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Problem 2: Old Colleagues Nikos is a senior manager in a large mutual fund, where he is working with two of his former students; Stavroula
Problem 2: Old Colleagues Nikos is a senior manager in a large mutual fund, where he is working with two of his former students; Stavroula and Giacomo. They are responsible for the regional portfolios of the fund in Greece (Stavroula) and Italy (Giacomo), currently valued at $500 million each. The Greek portfolio is expected to make 8% next year with o = 0.3, while the Italian portfolio has expected return 4%. The returns of both are distributed normally. Nikos has asked his former students to estimate the Value-at-Risk at the 10% for each position. 1. Help Stavroula estimate VaR10% of the Greek portfolio (in $). 2. Giacomo finds that the two portfolios have the same VaR10%. What is the standard deviation of the Italian portfolio? Problem 2: Old Colleagues Nikos is a senior manager in a large mutual fund, where he is working with two of his former students; Stavroula and Giacomo. They are responsible for the regional portfolios of the fund in Greece (Stavroula) and Italy (Giacomo), currently valued at $500 million each. The Greek portfolio is expected to make 8% next year with o = 0.3, while the Italian portfolio has expected return 4%. The returns of both are distributed normally. Nikos has asked his former students to estimate the Value-at-Risk at the 10% for each position. 1. Help Stavroula estimate VaR10% of the Greek portfolio (in $). 2. Giacomo finds that the two portfolios have the same VaR10%. What is the standard deviation of the Italian portfolio
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