Mean of daily percentage changes of the exchange, Ask an Expert

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Mean of daily percentage changes of the exchange rates:0.009755%

Standard deviation: 0.782254

(1) Suppose today's exchange rate is KRW 1166.35/USD. Given the two parameter estimates above, what is the probability for the exchange rate to reach 1200 or higher tomorrow?

(2) Let's repeat the exercise for a longer horizon. Assume that today's exchange rate is still KRW 1166.35/USD. What is the probability for the exchange rate to reach 1200 or higher five days later? Assume that exchange rate changes are independently and identically distributed over time.

(3) Under a normal distribution, what is the probability for a random variable to occur outside five standard deviations? ( P( |Z|>=5 ) =? )

(4) Suppose that you are holding $1 millions for five days. What is your 5% VaR (value-at-risk) in KRW? Estimate the VaR assuming that exchange rate percentage changes are normally distributed.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91788444

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