Sumitomo Bank's risk manager has estimated that the DEARs of two of its major assets in its trading portfolio, foreign exchange and bonds, are -$150,000 and -$250,000, respectively. What is the 10-day VAR of Sumitomo's trading portfolio if the correlation among assets is assumed to be -1.0?
A)-$100,000.
B)-$316,228.
C)-$1,106,797.
D)-$1,204,161.
E)-$1,264,911.

Question

Quizplus · Accepted Answer

VAR (portfolio) = [(-150,000)^2 + (-250,000)^2 - 2*(-150,000)*(-250,000)*(-1.0)]^0.5 * (10)^0.5 * 1.645

VAR (portfolio) = $316,228.

Sumitomo Bank's Risk Manager Has Estimated That the DEARs of Two