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You have $10m portfolio with a one-week standard deviation of 1%. You will add $10m of an asset to the portfolio. The one-week standard deviation of the return of the new asset is 1%. The correlation coefficient is 0. For this short horizon, assume the expected returns of both positions is zero. Compute the 95% $VaR of the original $10m, the 95% $VaR of the new $20m portfolio, and the incremental $VaR of the added $10m position (the difference between the first two answers).

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92251174

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