Question: This question is the same as the previous question, but rather than owning a put and call option on XYZ, you have sold a put

This question is the same as the previous question, but rather than owning a put and call option on XYZ, you have sold a put and call on XZY. As before, the strike of both options is $105 and time to expiration is one year. As before, calculate the one-day 95% daily VaR for each security and for the portfolio as a whole using the delta-normal approach, assuming theta is zero for both options. Is the VaR less than, equal to, or greater than the VaR in the previous question? Is the risk of the two portfolios the same?

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The VaR of the call and the put in isolation are 164 just as in the previous equation This is becaus... View full answer

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