Some time ago a U.S. company entered into a forward contract to buy 10 million at $1.20 forward rate. The contract has now six months to maturity. The daily volatility of a six- month zero-coupon euro bond (when its price is converted to dollars) is 0.07% and the daily volatility of a six-month zero-coupon dollar bond is 0.06%. The correlation between returns from the two bonds is 0.85. The current exchange rate is $1.18 1, and the six-month currency interest rates are 2.5% p.a. for $, and 1% p.a. for , respectively. = Calculate the standard deviation of the change in the dollar value of the forward contract in one day. What is the 10-day 95% VaR? Some time ago a U.S. company entered into a forward contract to buy 10 million at $1.20 forward rate. The contract has now six months to maturity. The daily volatility of a six- month zero-coupon euro bond (when its price is converted to dollars) is 0.07% and the daily volatility of a six-month zero-coupon dollar bond is 0.06%. The correlation between returns from the two bonds is 0.85. The current exchange rate is $1.18 1, and the six-month currency interest rates are 2.5% p.a. for $, and 1% p.a. for , respectively. = Calculate the standard deviation of the change in the dollar value of the forward contract in one day. What is the 10-day 95% VaR