Calculation Of Bank’s Trading Portfolio And DEARs

Question

Sumitomo Bank’s risk manager has estimated that the DEARs of two of its major assets in its trading portfolio, foreign exchange and bonds, are –$150,000 and –$250,000, respectively.

1. What is the total DEAR of Sumitomo’s trading portfolio if the correlation among assets is assumed to be 0.0?
    a. –$100,000.
    b. –$291,548.
    c. –$350,000.
    d. –$380,789.
    e. –$400,000.

2. What is the total DEAR of Sumitomo’s trading portfolio if the correlation among assets is assumed to be –1.0?
    a. –$100,000.
    b. –$291,548.
    c. –$350,000.
    d. –$380,789.
    e. –$400,000.

3. What is the 10-day VAR of Sumitomo’s trading portfolio if the correlation among assets is assumed to be –1.0?
    a. –$100,000.
    b. –$316,228.
    c. –$1,106,797.
    d. –$1,204,161.
    e. –$1,264,911.

Summary

These short questions belong to Finance and it is about calculation DEARs of bank’s trading portfolio including correlation.

Total Word Count 63