Describe the diversification benefit, Financial Accounting

Assignment Help:

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?

 


Related Discussions:- Describe the diversification benefit

#titleaccounting concept.., what is the implication of applying accounting ...

what is the implication of applying accounting concept wrongly

Disclaimer-liquidation of companies, Disclaimer The liquidator may disc...

Disclaimer The liquidator may disclaim onerous property consisting of: 1.    Land burdened with onerous covenants; 2.    Stocks and shares; 3.    Unprofitable contracts, or 4.

Conservatism, business is started with the objective of making profits but ...

business is started with the objective of making profits but the conservatism concept says not to anticipate profit.... why so??

Accounting treatment of deferred tax-financial statement, Accounting treatm...

Accounting treatment of deferred tax The objective of accounting for deferred tax is to ensure that the profits for the period d onto fluctuate due to temporary differences. To a

Wacc and gearing, WACC and gearing There are two major theories linking...

WACC and gearing There are two major theories linking a company's WACC and its gearing ratio. (i) The usual theory of gearing proposes a "U" shaped WACC curve. Cost of c

Sunk cost and opportunity cost., In the NPV analysis, sunk cost is not rele...

In the NPV analysis, sunk cost is not relevant whereas opportunity cost is for project evaluation. Requirements: Describe and justify the above statement about sunk cost an

Money, if you inherited 45,000 today and invested all of it in a security t...

if you inherited 45,000 today and invested all of it in a security that paid a 7 percent rate of return how much would you have in 25 years

What is the sampling unit, What is the objective of performing this test? W...

What is the objective of performing this test? What is the sampling unit? What is the population? These are the questions I am confused on the sampling and population I have som

Good will on consolidation-consolidated balance sheet, Good will on consoli...

Good will on consolidation Good will on consolidation arises when the purchase consideration paid by the holding company is different from the value of the net assets acquired i

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd