Is the bank meeting its current capital reserve requirement How much more is

# Is the bank meeting its current capital reserve

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Is the bank meeting its current capital reserve requirement? How much more is required? Problem Set 6: #8 M M M W z 09 . 1 \$ 68 . 14 \$ 031873 . 33 . 2 68 . 14 \$ 252 10 16 . 33 . 2 VaR Since 3 x \$1.09M = \$3.27M is required and the bank only has \$2.77 in reserves, they do not have enough. An additional \$.5M is required (3.27 – 2.77= .5). Problem Set 6: #9 Your portfolio currently consists of \$50, \$50, \$100, and \$200 in each of four stocks. The standard deviations of the stocks are 50%, 20%, 30%, and 40%, respectively. The return correlations among all four stocks are zero. What is your greatest expected loss in the coming year with 95% probability? What is your greatest expected loss in the coming year with 99% probability? Problem Set 6: #9 The percentage weights in each stock are out of \$400 invested. Since the stocks are uncorrelated, the covariances in the covariance matrix are all zero: The portfolio variance is then found as . The variance is 0.050156, and the standard deviation is 0.223956. The 95% 1-year VaR = 1.65 * 0.223956 * \$400 = \$147.81. The 99% 1-year VaR = 2.33 * 0.223956 * \$400 = \$208.73. 16 . 0 0 0 0 0 09 . 0 0 0 0 0 04 . 0 0 0 0 0 25 . 0 Σ , 500 . 0 250 . 0 125 . 0 125 . 0 w Σ w w' Problem Set 6: #10 Shares of Chumbucket Restaurants Inc. sell for \$100 and have a standard deviation of 40%. Consider a portfolio that is long 50 shares of stock, long 100 call options with strike price \$110, and short 100 put options with strike price \$90. A graph of the distribution of annual portfolio

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