Suppose you know that the gamma of the portfolio in Problem 10.15 is -2.6. Derive a quadratic

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Suppose you know that the gamma of the portfolio in Problem 10.15 is

-2.6. Derive a quadratic relationship between the change in the portfolio value and the percentage change in the underlying asset price in 1 day.

(a) Calculate the first three moments of the change in the portfolio value.

(b) Using the first two moments and assuming that the change in the portfolio is normally distributed, calculate the 1-day 95% VaR for the portfolio,

(c) Use the third moment and the Cornish-Fisher expansion to revise your answer to (b).

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Risk Management And Financial Institutions

ISBN: B008AUN1VW

1st Edition

Authors: John C Hull

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Question Posted: Jul 10, 2024 10:04 AM

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Suppose you know that the gamma of the portfolio in Problem 10.15 is -2.6. Derive a quadratic

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Risk Management And Financial Institutions

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