Critique each of three methods of calculating value at risk

Reference no: EM13925673

1. Critique each of the three methods of calculating Value at Risk, giving one advantage and one disadvantage of each.

2. Comment on the current credit risk assumed for each of the following positions. Treat them separately; that is, not combined with any other instruments.

a. You are short an out-of-the-money interest rate call option.

b. You entered into a pay fixed-receive floating interest rate swap a year ago. Since that time, interest rates have increased.

c. You are long an in-the-money currency put option.

d. You are long a forward contract. During the life of the contract the price of the underlying asset has decreased below the contract price.

Reference no: EM13925673

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