This question requires you to consider a three-asset portfolio valued at 10 million AUD. The portfolio consists of the following assets: AMP, Commonwealth Bank (CBA) and QBE. The variance covariance matrix of 5 day continuously compounded returns is equal to (a) Define the Value at Risk (VAR) for a portfolio. (b) Assuming portfolio weights of AMP (40%), CBA (30%), QBE (30%), calculate the 99 % 5 day relative VaR estimate (employ a z score measured to 2 decimal places) (c) Calculate the VaR diversification benefit of the portfolio.
This question requires you to consider a three-asset portfolio valued at 10 million AUD. The portfolio consists of the following assets: AMP, Commonwealth Bank (CBA) and QBE. The variance covariance matrix of 5 day continuously compounded returns is equal to (a) Define the Value at Risk (VAR) for a portfolio. (b) Assuming portfolio weights of AMP (40%), CBA (30%), QBE (30%), calculate the 99 % 5 day relative VaR estimate (employ a z score measured to 2 decimal places) (c) Calculate the VaR diversification benefit of the portfolio.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Question
![This question requires you to consider a three-asset portfolio valued at 10 million AUD. The portfolio
consists of the following assets: AMP, Commonwealth Bank (CBA) and QBE. The variance covariance
matrix of 5 day continuously compounded returns is equal to
(a) Define the Value at Risk (VAR) for a portfolio.
(b) Assuming portfolio weights of AMP (40%), CBA (30%), QBE (30%), calculate the 99 % 5 day
relative
VaR estimate (employ a z score measured to 2 decimal places)
(c) Calculate the VaR diversification benefit of the portfolio.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbf1e2dcd-2600-4313-93c0-142ff45a17d5%2Fac62c510-8250-46e2-97d4-abc62e2eb107%2Focav8da_processed.png&w=3840&q=75)
Transcribed Image Text:This question requires you to consider a three-asset portfolio valued at 10 million AUD. The portfolio
consists of the following assets: AMP, Commonwealth Bank (CBA) and QBE. The variance covariance
matrix of 5 day continuously compounded returns is equal to
(a) Define the Value at Risk (VAR) for a portfolio.
(b) Assuming portfolio weights of AMP (40%), CBA (30%), QBE (30%), calculate the 99 % 5 day
relative
VaR estimate (employ a z score measured to 2 decimal places)
(c) Calculate the VaR diversification benefit of the portfolio.
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