Compute the maximum one month loss of currency portfolio?, Ask an Expert

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Q1) Martins, Inc. is U.S.-based exporting firm which expects to get payments denominated in both Euros and British pounds in one month. Based on today’s spot rates, dollar value of funds to be received is evaluated at $500,000 for Euros and $300,000 for the British pounds. Based on data for last 12 months, Volusia evaluates standard deviation of monthly percentage changes to be 8% for euro and 3% for British pounds. Correlation coefficient between euro and the British pounds is 0.30. Determine portfolio standard deviation? Suppose the expected percentage change of 0.0 percentage for each currency in next month, compute the maximum one month loss of currency portfolio? Use 97% confidence level and suppose monthly percentage change for each currency are normally distributed.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9161109

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