Consider an Australian financial institution with a trading position of 1’000’000 EUR. The current exchange rate is AUD 1.6 / EUR.

a) Calculate the value of the position in AUD.
b) The volatility of the exchange rate is AUD 0.1 / EUR. Calculate the volatility in percent of the exchange rate.

c) Calculate the extreme adverse change in the foreign exchange rate for ? = 1% in percent and in AUD x / EUR.

d) Calculate the daily earnings at risk for the foreign exchange rate exposure. 

e) Calculate the 5-day earnings at risk for the foreign exchange rate exposure.

Answer rating: 100% (QA)

Calculating Foreign Exchange Risk a Value of the position in AUD Position in EUR Exchange rate AUDEU... View the full answer