Derive an approximate linear relationship

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Reference no: EM131239516

A financial institution owns a portfolio of options on the US dollar-sterling exchange rate. The delta of the portfolio is 56.0. The current exchange rate is 1.5000.

Derive an approximate linear relationship between the change in the portfolio value and thepercentage change in the exchange rate. If the daily volatility of the exchange rate is 0.7%, estimate the 10-day 99% VaR.

Reference no: EM131239516

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