You are a Thai investor. Suppose you have a €5M liability to be paid in one year. The current spot rate is THB49.95/€, and the one year forward rate is THB54.25/€. Having collected some monthly exchange rate data, you estimate that the expected monthly exchange rate change ( ) is 0%, the monthly standard deviation of the exchange rate change is 7%, and that the exchange rate change is well described by the normal distribution. Relative to a fully hedged position, what is the THB value at risk of the unhedged liability? In other words, there is only a 5% chance that you will lose more than what amount?

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