Describe the diversification benefit, Financial Accounting

A)  A portfolio's daily changes have a standard deviation of $15 million. Suppose the daily changes in the portfolio's value have a first order serial correlation of 0.25. Calculate the 5-day, 95% VaR with and without the correlation adjustment.

B) An portfolio consists of options on two companies stocks, A and B. The details are as follows:

                                                            Stock A                       Stock B

                        Delta (δ)                      45,000                         28,000

                        Stock price (S)              51.25                           38.55

                        Daily volatility (σs)        0.025                           0.021

                        Correlation (ρ)              0.45

Please calculate the 5-day, 99% VaR for the two option positions separately and for the portfolio as a whole. How much is the diversification benefit?

 

Posted Date: 3/25/2013 5:24:08 AM | Location : United States







Related Discussions:- Describe the diversification benefit, Assignment Help, Ask Question on Describe the diversification benefit, Get Answer, Expert's Help, Describe the diversification benefit Discussions

Write discussion on Describe the diversification benefit
Your posts are moderated
Related Questions
The costs that follow were extracted from the accounting records of various different manufacturers: 1.    Weekly wages of an equipment maintenance worker 2.    Marketing costs

Q. Availability of fresh issue of equity? A fresh issue of equity finance mayn't be readily available to a listed company or may be available on terms that are unacceptable wit

Rescission of receiving order The order may be rescinded by the court if: The court has sanctioned a composition or scheme of arrangement; The debts have been paid in

the following information relates to Thomas limited who decide to commence business on 01 January 2016 with R375000 cash: what is his budget for February, march, April?

On July 1, 2010, Spear Co. issued 1,000 of its 10%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, 2010 and mature on April 1, 2020. Interest is payable sem

Define the term- How are businesses organised Nearly all businesses which involve more than a few owners and/or employees are set up as limited companies. This means that finan

Activity Cost Drivers An element of measurement for the stage (or quantity) of an activity that is performed within a business company.  Hence, a movement cost driver represen

The City of Miami must replace a number of its concrete mixer trucks with new trucks. It has received two bids and has evaluated closely the performance characteristics of the seve

The balance sheet and income statement for Bingle Ltd is presented to you as follows: Balance Sheet Extract as at 30 June 2012 with comparatives

Create a description of your company and its primary business activities. Include: a) A brief historical summary b) The lines of business the firm is engaged in (Is the compa