question archive ABC Bank has three assets, they are listed as below: a zero-coupon bond with a maturity of 8 years
Subject:FinancePrice: Bought3
ABC Bank has three assets, they are listed as below:
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Calculate the values of Daily Earnings at Risk (DEAR) for these three assets separately by using a 5% one-tail probability (that is, the Z-value from the normal distribution table is 1.65).
If the correlation coefficients between bond and foreign currency exposure, bond and equity, and foreign currency exposure and equity are 0.2, -0.3, and -0.01, respectively, calculate the DEAR for the aggregated portfolio. Provide brief explanation why the aggregated portfolio's DEAR is different from the sum of the DEARs of the three assets.