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The vega of a derivative portfolio dependent on the dollar - sterling exchange rate is 2 5 0 ( $ per % ) . Estimate

The vega of a derivative portfolio dependent on the dollar

-

sterling exchange rate is

250 (

$ per

%) .

Estimate the effect on the portfolio of an increase in the volatility of the exchange rate from

12 %

14 % .

The value of the portfolio will increase if there is an increase in volatility to:

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