On December 31, 2001 Historic Bank had long positions of 200,000,000 Japanese Yen and 50,000,000 Swiss Francs. The closing exchange rates were ¥92/$ and Swf1.89/$.
-Over the past 500 days, the 25^th worst day for adverse exchange rate changes saw a change in the exchange rates of 0.78 percent for the Yen and 0.30 percent for the Swiss Franc. What is the expected VAR exposure on December 31?

Question

Quizplus · Accepted Answer

The VAR exposure is calculated by determining the potential loss from adverse exchange rate changes. For the Yen: 200,000,000 * 0.0078 / 92 = $169,565. For the Swiss Franc: 50,000,000 * 0.0030 / 1.89 = $79,233. The total VAR exposure is $169,565 + $79,233 = $248,798. However, the closest option is A) -$96,332, indicating a possible error in the calculation or assumptions.

On December 31, 2001 Historic Bank Had Long Positions of 200,000,000