融跃教育

jason    2020-09-25 10:34

致精进的你:

The first step is to calculate the VaR of the original portfolio of two equities, U.S (u) and emerging markets (e).(1.2^2+1.2^2+2*0.36*1.2*1.2)^0.5=1.979million Rebalanced position: 1-day 95% VaR: After the rebalance, the market value of the position in the U.S. equities is reduced by 8/48 = 0.1667, so VaRu is now equal to (1 - 0.1667)×(USD 1.2 million) = USD 1.0 million. Meanwhile the market value for the position in the emerging market equities has increased by 8/35 = 0.2286 so that VaRe is now (1 + 0.2286)× (USD 1.2 million) = USD 1.4743 million. Hence the 1-day 95% VaR of the new portfolio (after rebalancing) = (1.0^2+1.4743^2+2*0.36*1.0*1.4743)^0.5=2.0579million Next, convert the 1-day 95% VaR to 10-day 95% VaR: 10-day 95% VaR = (1-day 95% VaR) × sqrt(10)/1 = 2.0579 x 3.162278 = USD 6.5078million. Finally, convert the 10-day 95% VaR to 10-day 99% VaR: 10-day 99% VaR = (10-day 95% VaR) × (2.326/1.645) = 6.5078 x 1.4140 = USD 9.2019million. The question is to compare the original 1-day 95% VaR (USD 1.979m) to the new rebalanced 10-day 99% VaR (USD 9.2019). Thus, VaR will increase by (9.2019 – 1.979) million, or USD 7.2229million. Thus, D is correct.

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