Business, 29.04.2021 03:20 tiiia

A bank has written a European call option on one stock and a European put option on another stock. For the first option, the stock price is 50,the strike price is 51, the volatility is 28% per annum, and the time to maturity is nine months. For the second option, the stock price is 20, the strike price is 19, the volatility is 25% per annum, and the time to maturity is one year. Neither stock pays a dividend, the risk-free rate is 6% per annum, and the correlation between stock price returns is 0.4. Calculate a 10-day 99% VaR (a) using only deltas, (b) using the partial simulation approach, and (c) using the full simulation approach.

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A bank has written a European call option on one stock and a European put option on another stock. F...

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