This paper circulates around the core theme of Some time ago, a company entered into a forward contract to buy £1 million for $1.5 together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
15.13 Some time ago, a company entered into a forward contract to buy £1 million for $1.5… 1 answer below » 15.13 Some time ago, a company entered into a forward contract to buy £1 million for $1.5 million. The contract now has six months to maturity. The daily volatility of a six-month zero-coupon sterling bond (when its price is translated to dollars) is 0.06% and the daily volatility of a six-month zero- coupon dollar bond is 0.05%. The correlation between returns from the two bonds is 0.8. The current exchange rate is 1.53. Calculate the standard deviation of the change in the dollar value of the forward contract in one day. What is the 10-day 99% VaR? Assume that the View complete question » 15.13 Some time ago, a company entered into a forward contract to buy £1 million for $1.5 million. The contract now has six months to maturity. The daily volatility of a six-month zero-coupon sterling bond (when its price is translated to dollars) is 0.06% and the daily volatility of a six-month zero- coupon dollar bond is 0.05%. The correlation between returns from the two bonds is 0.8. The current exchange rate is 1.53. Calculate the standard deviation of the change in the dollar value of the forward contract in one day. What is the 10-day 99% VaR? Assume that the six-month interest rate in both sterling and dollars is 5% per annum with continuous compounding. View less » Nov 16 2015 11:46 AM
