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hw11 - ORIE 4630 D Ruppert Homework#11 due Friday Note...

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ORIE 4630 — D. Ruppert Homework #11 — due Friday, Nov 12, 2010 Note: Students are required to work independently on homework. 1. This problem uses daily stock price data in the file Stock_FX_Bond.csv . In this exercise, use only the first 500 prices on each stock. The following R code reads the data and extracts first 500 the prices for five stocks. AC ” in the variables names means “adjusted closing” price. dat = read.csv("Stock_FX_Bond.csv",header=T) prices = as.matrix(dat[1:500,c(3,5,7,9,11)]) (a) What is the sample mean vector and sample covariance matrix of the 499 returns on these stock? (b) How many shares of each stock should one buy to invest 50 million dollars in an equally-weighted portfolio. Use the prices at the end of the series, e.g., prices[,500] . (c) What is the one-day VaR(0.1) for this equally-weighted portfolio? Use a para- metric VaR assuming normality. (d) What is the five-day Var(0.1) for this portfolio? Use a parametric VaR assuming normality. You can assume that the daily returns are uncorrelated.
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