Reference no: EM131492379
Question: Suppose that you own, on 1 January 2017, a portfolio worth $10 million AUD consisting of investments in four stocks traded on domestic and international markets. Appendix provides the details of the portfolio allocation for each group, including the trading symbol and the trading market of each stock and the Australian dollar (AUD) value of each holding.
Daily closing prices of stocks can be downloaded from yahoo finance. Consider a historical sampling period of three years from 1st January 2014 through 31st December 2016. Each group needs to submit a written Risk Report for your portfolio and a Supplementary Excel Spreadsheet by 26 May 2017, which should include the following parts:
Part A1: Calculate the 95% daily portfolio VaR using the basic methodology of the historical simulation approach.
Part A2: Calculate the 95% daily portfolio VaR using the exponential weighting methodology of the historical simulation approach.
Part B1: Calculate the 95% daily VaR for the portfolio using the model-building approach. Generate a VaR report for the portfolio based on the model-building approach, which should contain the following elements:
(i). An analysis of the diversification effect (undiversified VaR and diversified VaR) (ii). Marginal VaR
(iii). Component VaR
Part B2: What is relationship between marginal VaR and incremental VaR?
Part B3: On average, what is the relationship between component VaR and individual VaR for a particular position?
Part B4: Marginal VaR in Part B1 are useful tools for risk management. Discuss how to change the portfolio positions to minimizing the portfolio VaR while keeping the portfolio fully invested. Generate a new VaR report based on the risk-minimizing positions.
Part C1: Implement backtesting procedures to evaluate the portfolio VaR determined in Part A1, Part A2 and Part B1, respectively, with unconditional coverage.
Part C2: Implement backtesting procedures to evaluate the portfolio VaR determined in Part A1, Part A2 and Part B1, respectively with conditional coverage.
Part C3: Backtesting is usually conducted on a short horizon, such as daily returns. Explain why.
Part D: Contrast and compare your findings in Part C1 and Part C2 and further comment on the performance of the market risk measurement approaches used in Part A1, Part A2 and Part B1.
The assignment is expected to be done in a professional manner and will be graded under those expectations. This means that grammar, spelling, and overall presentation will have an influence on the score.
Attachment:- Appendix.rar
Federal patent laws and penalties for patent infringement
: Describe how an invention can be patented under federal patent laws and the penalties for patent infringement.
|
Determine the revenues and expenses of crazy mountain
: FIAC214 - Financial Accounting Group Assignment. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. after the adjusting entries
|
Internal retaliation and employees behavior
: What vvould be the protection given to this individual in terms of any internal retaliation and other employees' behavior?
|
Establish the room rates in dollars for each country
: Imagine that you are traveling through South America and staying in budget hotels. Based on the average room rates and exchange rates in the table below.
|
Relationship between marginal var and incremental var
: FIN5MRM- Market Risk Management-Calculate the 95% daily portfolio VaR using the basic methodology of the historical simulation approach.
|
Ethical challenges regarding employees
: Research and review the ethical challenges regarding employees (i.e., diversity, discrimination, sexual harassment, privacy, employee theft, bad leadership, etc
|
Bible relate to strategic planning in business
: How does the bible relate to strategic planning in business? use three-5 examples from the bible where they can relate to strategic planning?
|
Would these discussed developments be a matter of concern
: Assume that the United States is running a large trade deficit. What predictions would you make about future changes in the value of the dollar.
|
Information on the best approach to take
: When organizations select a delivery method for products or services, where do they get information on the best approach to take?
|