9.11. Bank of Southern Tasmania has determined that its inventory of 20 million euros (EUR) and 25 million British pounds (BP) is subject to market risk. The spot exchange rates are $0.40/EUR and $1.28/BP, respectively. The s's of the spot exchange rates of the EUR and BP, based on the daily changes of spot rates over the past six months, are 65 bp and 45 bp, respectively. Determine the bank's 10- day VAR for both currencies. Use adverse rate changes in the 95 percentile.
9.11. Bank of Southern Tasmania has determined that its inventory of 20 million euros (EUR) and 25 million British pounds (BP) is subject to market risk. The spot exchange rates are $0.40/EUR and $1.28/BP, respectively. The s's of the spot exchange rates of the EUR and BP, based on the daily changes of spot rates over the past six months, are 65 bp and 45 bp, respectively. Determine the bank's 10- day VAR for both currencies. Use adverse rate changes in the 95 percentile.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![9.11. Bank of Southern Tasmania has determined that its
inventory of 20 million euros (EUR) and 25 million British
pounds (BP) is subject to market risk. The spot exchange
rates are $0.40/EUR and $1.28/BP, respectively. The s's of
the spot exchange rates of the EUR and BP, based on the
daily changes of spot rates over the past six months, are
65 bp and 45 bp, respectively. Determine the bank's 10-
day VAR for both currencies. Use adverse rate changes in
the 95th percentile.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F08c05e4b-cfb6-43b1-8136-f3fdca79e2e7%2F86c0aaee-197d-44d7-8146-964d323ae7b6%2Flypwiry_processed.jpeg&w=3840&q=75)
Transcribed Image Text:9.11. Bank of Southern Tasmania has determined that its
inventory of 20 million euros (EUR) and 25 million British
pounds (BP) is subject to market risk. The spot exchange
rates are $0.40/EUR and $1.28/BP, respectively. The s's of
the spot exchange rates of the EUR and BP, based on the
daily changes of spot rates over the past six months, are
65 bp and 45 bp, respectively. Determine the bank's 10-
day VAR for both currencies. Use adverse rate changes in
the 95th percentile.
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