Reference no: EM133113155

There are two stocks (A and B) in a portfolio, worth $200,000 and $400,000 respectively. The annual volatility is 0.2 and 0.3 respectively. The correlation between the two stocks is 0.4. Assuming 252 days in a year, and the z-score for the 99% confidence level is 2.3263.

The 10-day, 99% VAR for A and B, respectively, is ["$58,622 and $175,845", "$2,520 and $7,559", "$18,537 and $55,610", "$21,237 and $63,711"]

The 10-day, 99% ES (expected shortfall) for A and B, respectively, is ["$18,537 and $55,610", "$67,175 and $201,462", "$21,237 and $63,711", "$2,520 and $7,559"]

The 10-day, 99% VAR and ES (expected shortfall) for the portfolio is, respectively, ["$206,413 and $236,483", "$67,175 and $201,462", "$21,237 and $63,711", "$65,275 and $74,783"]

The VAR and ES (expected shortfall) reduction in the portfolio is, respectively ["$21,237 and $63,711", "$8,874 and $10,165", "$65,275 and $74,783", "$67,175 and $201,462"]