)explain the concept of the delta normal method for calculating VAR when options are present in the portfolio. b)explain the basic concepts of the historical method and the Monte Carlo simulation method of calculating VARs. c)discuss the benefits and limitations of VAR. d)define credit risk (default risk). e)explain how option pricing theory can be used in valuing default risk.
)explain the concept of the delta normal method for calculating VAR when options are present in the portfolio. b)explain the basic concepts of the historical method and the Monte Carlo simulation method of calculating VARs. c)discuss the benefits and limitations of VAR. d)define credit risk (default risk). e)explain how option pricing theory can be used in valuing default risk.
Chapter6: Risk And Return
Section: Chapter Questions
Problem 1Q
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a)explain the concept of the delta normal method for calculating VAR when options are present in the portfolio.
b)explain the basic concepts of the historical method and the Monte Carlo simulation method of calculating VARs.
c)discuss the benefits and limitations of VAR.
d)define credit risk (default risk).
e)explain how option pricing theory can be used in valuing default risk.
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