a a portfolios daily changes have a standard, Financial Accounting

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a a portfolios daily changes have a standard

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 (σ_s) 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?

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Financial Accounting: a a portfolios daily changes have a standard

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Financial Accounting: a a portfolios daily changes have a standard

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