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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