A financial institution owns a portfolio of options on the U.S. dollar-sterling exchange rate. The delta of the portfolio is 62 . The current exchange rate is 1.56 . Derive an approximate linear relationship between the change in the portfolio value and the percentage change in the exchange rate. If the daily volatility of the exchange rate is 0.76% , estimate the 10-day 99% VaR. [CH22Q2V7] 5.61 O 5.41 5.8
A financial institution owns a portfolio of options on the U.S. dollar-sterling exchange rate. The delta of the portfolio is 62 . The current exchange rate is 1.56 . Derive an approximate linear relationship between the change in the portfolio value and the percentage change in the exchange rate. If the daily volatility of the exchange rate is 0.76% , estimate the 10-day 99% VaR. [CH22Q2V7] 5.61 O 5.41 5.8
ChapterP3: Part 3: Exchange Rate Risk Management
Section: Chapter Questions
Problem 2Q
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