Referring to the daily-return graphs for the SPDR S&P 500 ETF Trust (SPY) and the Direxion...

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Referring to the daily-return graphs for the SPDR S&P 500 ETF Trust (SPY) and the Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG) given below: 10° 10-1 SPY 10° Empirical Gaussian 10-1 JNUG Empirical Gaussian ^ ^ 10-2 10-3 10-3 1014 -15 10-* -10 10 <-80 -60 <-40 -20 0 20 40 RETURN (percent) RETURN (percent) (a) (2 pts) Which is riskier, the SPY or the JNUG? Briefly explain. 8 8- (b) (3 pts) Does the JNUG return distribution have fat tails? Briefly explain and include a definition of fat tails in your explanation. (c) (3 pts) If your clearing firm that requires the client to cover 99.8% of overnight losses, estimate the leverage that they would be willing to give to a client that wanted to take a position in JNUG. Referring to the daily-return graphs for the SPDR S&P 500 ETF Trust (SPY) and the Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG) given below: 10° 10-1 SPY 10° Empirical Gaussian 10-1 JNUG Empirical Gaussian ^ ^ 10-2 10-3 10-3 1014 -15 10-* -10 10 <-80 -60 <-40 -20 0 20 40 RETURN (percent) RETURN (percent) (a) (2 pts) Which is riskier, the SPY or the JNUG? Briefly explain. 8 8- (b) (3 pts) Does the JNUG return distribution have fat tails? Briefly explain and include a definition of fat tails in your explanation. (c) (3 pts) If your clearing firm that requires the client to cover 99.8% of overnight losses, estimate the leverage that they would be willing to give to a client that wanted to take a position in JNUG.

Answer rating: 100% (QA)

a Based on the given dailyreturn graphs it can be observed that the JNUG has a wider range of return... View the full answer