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Question 8: Estimate the capital requirement under Basel I for a bank that has following transactions with another bank, Assume no netting. (a) A two-year
Question 8: Estimate the capital requirement under Basel I for a bank that has following transactions with another bank, Assume no netting. (a) A two-year forward contract on a foreign currency, with the following information: Currentvalueofthecontract(in$millions):Contracttobuyforreigncurrencyworth(in$millions):3.856 (b) A long position in a six-month option on the S\&P500, with the following information: The principal (in \$millions) 50.6 Current value of the option (in $ millions): 5.4 (c) A five-year swap involving oil, with the following information: The principal (in \$millions) 31.7 Current value of the swap (in $ millions): 3.9 What difference does it make if the netting (You can use the relevant tables on the slides.)
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