Financial Risk Management (N1569)
Topic 3: Introducing Market Risk
1. If the volatility of returns is 25% and the portfolio has value $3.5 million, then what is the volatility of the P&L?
2. If the volatility of P&L is $5 million and the portfolio has value $50 million, then what is the volatility of returns?
3. Suppose that APPLE stock returns 20% and DELL stock returns 10%, over the same period of time. What is the return of a portfolio that has $2m invested in APPLE and $3m invested in DELL?
4. If APPLE returns have a volatility of 20% and DELL returns have a volatility of 30%, and their correlation is 0.5, what is the volatility of the portfolio in Q3?
5. A portfolio has volatility 30% and the market index has volatility 15%. If the market correlation (i.e. the correlation between the portfolio and market returns) is 0.5, what is the portfolio beta?
6. A portfolio has a beta of 1.2 and a volatility of 40%. The market index has volatility 25%. What is the market correlation of this portfolio?