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In its trading book, a financial institution holds 20,000 shares of Enbridge Inc. (valued at $50 per share) and 40,000 shares of Manulife Financial Corporation (valued at $25 per share), and has sold 7,500 shares of TransCanada Corporation (valued at $60 per share) through a forward contract that matures in a year. The shift risk factor (standard deviation) is 3% for level I worldwide equity risk, 5% for level II equity risk, 8% for level III long individual stock positions, -8% for level III short individual stock positions, and 1% for non-hedgeable risk. Calculate the market risk capital charge on the bank’s trading book.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92319407

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