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1) Suppose a poruollo manager holds an lnvesLmenL poruollo conslsung of a slngle asseL. Clven
LhaL Lhe reLurn ls normally dlsLrlbuLed wlLh annual sLandard devlauon of 23 and annual mean
of 8. 1he currenL value of Lhe poruollo ls 830 mllllon. WhaL ls Lhe 3 one year value aL rlsk of
Lhe poruollo?
2) lnvesLec holds an lnvesLmenL poruollo conslsung of Lhree dlerenL asseLs. 1he poruollo reLurn
ls esumaLed Lo be normally dlsLrlbuLed wlLh monLhly mean of 1.3 and annual sLandard
devlauon of 30. 1he poruollo ls currenLly worLh 873 mllllon. ?ou have been approached by
lnvesLec Lo advlce on whaL ls Lhe maxlmum loss of Lhe above poruollo over Lhe nexL week wlLh
99 sureLy. WhaL answer would you provlde?
3) We have recenLly lnvesLed 8200 mllllon ln a well dlversled poruollo of equlues. Cur poruollo
reLurn ls perfecLly correlaLed wlLh Lhe !SL 1op-40 lndex, and Lhe poruollo has a beLa of 1. ln
addluon, Lhe poruollo pays a dlvldend of 1,3 per annum. We are also holdlng shorL posluons
ln !SL 1op-40 lndex fuLures conLracLs whlch maLures ln 9 monLhs ume. 1he value of Lhe posluon
ln Lhe !SL 1op-40 fuLures ls calculaLed Lo be 880,22 mllllon. llnally, we have a shorL posluon ln
200 S&-300 lndex fuLures conLracLs lnvesLed ln Lhe uS markeL. 1he currenL value ln Lhe
S&-300 lndex fuLures lnvesLmenL ls $8,33 mllllon.

Clven LhaL Lhe expecLed monLhly reLurn on Lhe !SL 1op-40 ls 1,7 and LhaL on Lhe S&-300 ls
1,33. 1he monLhly sLandard devlauon on Lhe !SL 1op-40 ls 3,3 and LhaL of Lhe S&-300 ls
3,8. 1he correlauon beLween Lhe Lwo lndlces ls 0,23 and Lhe currenL exchange raLe ls 8,27 8/
$.
WhaL ls Lhe one monLh 99 value aL rlsk of our comblned lnvesLmenL?

4) ?ou are responslble for a poruollo comprlslng Lhree lnvesLmenLs, Lwo of whlch are held ln
derlvauve lnsLrumenLs. ?our currenL equlLy poruollo lnvesLmenL of 8100 mllllon comprlses a
posluon ln Lhe ALSl. ln addluon, you hold a long posluon ln 300 lndex fuLures conLracLs on Lhe
ALSl wlLh each fuLures conLracL havlng an exposure of 83337. ?ou have also auempLed Lo
dlverslfy your rlsk and Lo Lhls end have sold 300 puL opuons on Lhe S&-300 lndex. Lach opuon
conLracL has an exposure of $1807 Lo Lhe S&-300 lndex.
1he conLracL mulupller for boLh Lhe opuons and fuLures conLracLs ls 10. 1he expecLed monLhly
raLe of reLurn on Lhe ALSl ls 1.3 and LhaL of Lhe S&-300 ls 1.83. 1he sLandard devlauon of
Lhe monLhly reLurns of Lhe ALSl ls 6.43, and LhaL of Lhe S&-300 ls 3.93. 1he correlauon
beLween Lhe monLhly raLes of reLurn ls esumaLed Lo be 0.73. lgnore currency rlsk.

a) Suppose Lhe currenL exchange raLe ls 8,27 8/$, whaL ls your one monLh 99 va8?
b) CalculaLe Lhe marglnal rlsk conLrlbuuon of each of your exposures.