# Calculation Of DEARs Of Bankâ€™s Trading Portfolio

Question

Sumitomo Bank’s risk manager has estimated that the DEARs of two of its major assets in its trading portfolio, foreign exchange and bonds, are –\$150,000 and –\$250,000, respectively.

1. What is the total DEAR of Sumitomo’s trading portfolio if the correlations among assets are ignored?
a. –\$100,000.
b. –\$291,548.
c. –\$350,000.
d. –\$380,789.
e. –\$400,000.

2. What is the total DEAR of Sumitomo’s trading portfolio if the correlation among assets is assumed to be 1.0?
a. –\$100,000.
b. –\$291,548.
c. –\$350,000.
d. –\$380,789.
e. –\$400,000.

3. What is the total DEAR of Sumitomo’s trading portfolio if the correlation among assets is assumed to be 0.80?
a. –\$100,000.
b. –\$291,548.
c. –\$350,000.
d. –\$380,789.
e. –\$400,000.

Summary

These short questions belong to Finance and it is about calculation DEARs of bank’s trading portfolio which includes correlation.

Total Word Count 57

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