Suppose that daily gains and losses are normally distributed with a standard deviation of (a) Estimate the

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Suppose that daily gains and losses are normally distributed with a standard deviation of

(a) Estimate the minimum regulatory capital the bank is required to hold for market risk. (Assume a multiplicative factor of 3.0.)

(b) Estimate the economic capital for market risk using a one-year time horizon and a 99.97% confidence limit.

(c) Why is the ratio of your answer in

(a) to your answer in

(b) not a good indication of the ratio of regulatory market risk capital to economic market risk capital in practice?

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Risk Management And Financial Institutions

ISBN: B008AUN1VW

1st Edition

Authors: John C Hull

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Question Posted: Jul 11, 2024 02:02 AM

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Suppose that daily gains and losses are normally distributed with a standard deviation of (a) Estimate the

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Risk Management And Financial Institutions

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