Question

"Consider a position consisting of a $100,000 investment in asset A and a $100,000investment in asset B. Assume that the daily volatilities of both assets are 1% and that the coefficient of correlation between their returns is 0.3. Estimate the 5-day 99% VaR and ES for the portfolio assuming normally distributed returns.The options mature in 8 months, and the futures contract underlying the option matures in 9 months. The current 9-month futures price is $8 per ounce, the exercise price of the options is $8, the risk-free interest rate is 12% per annum, and the volatility of silver futures prices is 18% per annum."

Answer 1

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