A portfolio manager holds a $100 million price position in 10-year Treasury notes with a daily volatility
Question:
A portfolio manager holds a $100 million price position in 10-year Treasury notes with a daily volatility of 0.9 percent. The manager can hedge by selling 5-year T-notes with a daily volatility of 0.5 percent and correlation of 0.97. For computation of VAR, assume normal distributions and a 95 percent confidence level. Based on this information, what amount did the manager sell, and what was the resulting VAR?
Portfolio A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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