Question

Suppose that daily gains (losses) are normally distributed with standard deviation of $5 million.
(a) Estimate the minimum regulatory capital the bank is required to hold. (Assume a multiplicative factor of 4.0.)
(b) Estimate the economic capital using a one-year time horizon and a 99.9% confidence level assuming that there is a correlation of 0.05 between gains (losses) on successive days.


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  • CreatedJuly 30, 2015
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