Saujana Bhd has a portfolio with a long position of RM2,000,000 in AAB bonds and short RM1,000,000 in Malaysian Government Securities (MGS). Volatilities are 1.58% and 1.90% per month, respectively, with a correlation of 0.9654. Compute the 95% monthly portfolio VaR and diversification effect.

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
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Saujana Bhd has a portfolio with a long position of RM2,000,000 in AAB bonds and short RM1,000,000 in Malaysian Government Securities (MGS). Volatilities are 1.58% and 1.90% per month, respectively, with a correlation of 0.9654. Compute the 95% monthly portfolio VaR and diversification effect.

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