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Solution Library
Calculate VAR For A Bank Based On DEAR And Total Capital For Lowering Market Risk
Question
TransAmerica Bank has estimated its previous day’s DEAR to be –1.28 million. It has also estimated its average VAR over the last sixty working days to be –$1.75 million. It uses its own internal model to estimate its capital requirements following the BIS guidelines. It currently has $2.75 million in Tier I capital, $2.80 million in Tier II capital, and $1.25 million in Tier III capital.
1. What is the 10-day VAR using the previous day’s DEAR estimate?
a. $1.28 million.
b. $3.24 million.
c. $4.05 million.
d. $10.05 million.
e. $12.80 million.
2. Using the BIS internal guidelines, what is the total capital (Tier I, II and III) required to lower market risk?
a. $1.28 million.
b. $3.24 million.
c. $4.05 million.
d. $5.25 million.
e. $12.80 million.
Summary
These short questions belong to Finance and it is about calculating 10 day VAR for a bank based on its DEAR estimate and the total capital required to lower market risk under BIS guidelines.
Total Word Count 75
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