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RSK4805 Assignment 2 (COMPLETE ANSWERS) 2024 - DUE 12 July 2024 Course Market Risk Management (RSK4805) Institution University Of South Africa (Unisa) Book Market Risk ManagementR46,41
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RSK4805 Assignment 2 (COMPLETE ANSWERS) 2024 - DUE 12 July 2024 Course Market Risk Management (RSK4805) Institution University Of South Africa (Unisa) Book Market Risk Management
RSK4805 Assignment 2 (COMPLETE ANSWERS) 2024 - DUE 12 July 2024
Course
Market Risk Management (RSK4805)
Institution
University Of South Africa (Unisa)
Book
Market Risk Management
RSK4805 Assignment 2
(COMPLETE ANSWERS) 2024 -
DUE 12 July 2024 ; 100%
TRUSTED
ADMIN
[COMPANY NAME]
,Question text The volatility of an asset is 2% per day. What is the
standard deviation of the percentage price change in sixteen days?
Percentage change in price is Answer%. What extra information do
you need to calculate the covariance if you know the correlation
between two variables? standard deviation of the two variables
covariance between the asset and the market standard deviation on
only one of the variables correlation between the two variables
To calculate the standard deviation of the percentage price change
over sixteen days when the volatility is 2% per day, we can proceed
as follows:
Given:
• Volatility (standard deviation of daily percentage change) =
2% per day
We need to find the standard deviation of the percentage price
change over 16 days.
Step-by-step calculation:
1. Calculate the standard deviation over 16 days:
Since volatility is given as 2% per day, the standard deviation
over 16 days (σ16\sigma_{16}σ16) is:
σ16=n⋅σdaily\sigma_{16} = \sqrt{n} \cdot
\sigma_{\text{daily}}σ16=n⋅σdaily
where nnn is the number of days (16 in this case), and
σdaily\sigma_{\text{daily}}σdaily is the daily volatility.
, σ16=16⋅2%=4⋅2%=8%\sigma_{16} = \sqrt{16} \cdot 2\% = 4
\cdot 2\% = 8\%σ16=16⋅2%=4⋅2%=8%
So, the standard deviation of the percentage price change over
sixteen days is 8%.
Answer: Percentage change in price is 8%.
Regarding the extra information needed to calculate covariance
when you know the correlation between two variables:
• If you know the correlation between two variables, you can
calculate the covariance with just the standard deviations of the
two variables and the correlation coefficient.
Therefore, the correct answer is:
• correlation between the two variable
Question 2 Not yet answered Marked out of 5.00 Flag question
Question text An analyst for Bloom Ltd gathered the following
information with regards to futures contract: • Current spot-market
price of R60 • A risk-free interest rate of 8.87% per annum • The
six-month futures contract is priced at R62.60 The actual futures
price of the contract is R59. The actual futures price is Answer less
thanmore thanthe same as the theoretical futures price. The futures
price is Answer underpricedoverpricedcorrectly priced. Arbitrage
strategy: • Answer buysell futures contract at R59 • Answer buysell
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