A financial institution owns a portfolio of options dependent on the US Dollar Sterling exchange rate. The delta of the portfolio with respect to percentage changes in the exchange rate is 7.3. If the daily volatility of the exchange rate is 0.5% and a linear model is assumed, calculate the estimated 10-day 95% VaR for the portfolio.

A financial institution owns a portfolio of options dependent on the US Dollar Sterling exchange rate. The delta of the portfolio with respect to percentage changes in the exchange rate is 7.3. If the daily volatility of the exchange rate is 0.5% and a linear model is assumed, calculate the estimated 10-day 95% VaR for the portfolio.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 32QA

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