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Calculate the dear for the two currencies

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Reference no: EM133004003

Choice Bank has determined that its inventory of yen (¥) and Swiss franc (SF) denominated securities is subject to market risk. The spot exchange rates are ¥95.50/$ and SF1.075/$, respectively. The σ's of the spot exchange rates of the ¥ and SF, based on the daily changes of spot rates over the past six months, are 75 bp and 55 bp respectively. Using adverse rate changes in the 90th percentile, the 10-day VARs for the two currencies, ¥ and SF, are $250 000 and $400 000, respectively.

a. Calculate the DEAR for the two currencies

b. Calculate the foreign exchange volatility for the two currencies.

c. Calculate the yen and Swiss franc-denominated value positions for Choice.

Reference no: EM133004003

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