|
Annual volatility: σ = 20.0% |
|
Annual risk-free rate = 6.0% |
|
Exercise price (X) = 24 |
|
Time to maturity = 3 months |
|
Stock price, S |
$21.00 |
$22.00 |
$23.00 |
$24.00 |
$24.75 |
$25.00 |
|
Value of call, C |
$0.13 |
$0.32 |
$0.64 |
$1.14 |
$1.62 |
$1.80 |
|
% Decrease in S |
−16.00% |
−12.00% |
−8.00% |
−4.00% |
−1.00% |
|
|
% Decrease in C |
−92.83% |
−82.48% |
−64.15% |
−36.56% |
−9.91% |
|
|
Delta (ΔC% / ΔS%) |
5.80 |
6.87 |
8.02 |
9.14 |
9.91 |
|
Alton Richard is a risk manager for a financial services conglomerate. Richard generally calculates the VAR of the company’s equity portfolio on a daily basis, but has been asked to estimate the VAR on a weekly basis assuming five trading days in a week. If the equity portfolio has a daily standard deviation of returns equal to 0.65% and the portfolio value is $2 million, the weekly dollar VAR (5%) is closest to:
A. $29,100.
B. $21,450.
C. $107,250.
D. $47,964.
|
