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
Presentation and hearing The petition is presented to the court and must be served on the debtor at least eight days before the hearing. If the debtor wishes to oppose it he mu

Question: Vinak Ltd., which produces three products provides you the following data for 2008-2009.

I need help with my homework

Looking for Income Statement and Balance Sheet for the Better USA, Inc. company for 2010 and 2011 Facts: Sales 11,573 (2010) and 12,936 (2011) - Depreciation 1,661 and 1,736 - Cost

This is an individual assessment contributing 50% of your marks for the module. The assignment is intended to help you develop skills of implementing financial models in Excel. The

DEBTOR'S PROPERTY AT COMMENCEMENT OF BANKRUPTCY 1) Doctrine of "relation back" : The trustee's title to the debtor's property is deemed to relate back to the commencement o

Read Appendix B, "Sample Brief Memorandum," that starts on page 193 of the textbook. In 2-3 pages (12 point font, double spaced), critique the memorandum based on what we've learne


Thatcher Corporation's bonds will mature in 12 years. The bonds have a face value of $1,000 and an 11.5% coupon rate, paid semi-yearly. The price of the bonds is $1,050. The bonds

Day Corporation purchased a patent on January 1, 2012 for $360,000. The patent had a useful life of 10 years at that date. In January of 2013, Day successfully defends the patent a