A bank has estimated its VAR for its bond portfolio is $25,600 and for its stock portfolio, it is $33,600. The correlation coefficient between the two portfolios is -0.25. How much VAR would be reduced if they were allowed to aggregate the VAR of the two portfolios? A $36,800.00 B $59,200.00 C $10,400.00 D $22,400.00
A bank has estimated its VAR for its bond portfolio is $25,600 and for its stock portfolio, it is $33,600. The correlation coefficient between the two portfolios is -0.25. How much VAR would be reduced if they were allowed to aggregate the VAR of the two portfolios? A $36,800.00 B $59,200.00 C $10,400.00 D $22,400.00
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
Related questions
Question
-
A bank has estimated its VAR for its bond portfolio is $25,600 and for its stock portfolio, it is $33,600. The correlation coefficient between the two portfolios is -0.25. How much VAR would be reduced if they were allowed to aggregate the VAR of the two portfolios?
A $36,800.00
B $59,200.00
C $10,400.00
D $22,400.00
Expert Solution
Step 1
Value at risk is a statistical tool used to determine the risk of portfolio securities and financial assets. There are various methods of determining value at risk. Investors can use VaR to determine a security's potential loss.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education