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Answer: JPY 6,320,000
The correct estimate for the component VaR of the financial asset is closest to JPY 6,320,000. This is calculated using the formula for Component VaR, which is Marginal VaR multiplied by the asset's weight (w) and the total portfolio value (W). In this case, the Marginal VaR for the financial asset is 0.03160025, the weight of the financial asset is 0.5 (since the portfolio is split equally between the financial and real-estate assets), and the total portfolio value is JPY 40,000,000. Therefore, the calculation is as follows: Component VaR = Marginal VaR * w * W = 0.03160025 * 0.5 * JPY 40,000,000 = JPY 6,320,050 This result is rounded to JPY 6,320,000, which corresponds to option B. The other options provided are incorrect as they do not match the calculated value: A is close to the individual VaR of the financial asset, C is close to the individual VaR of the real-estate asset, and D is close to the portfolio VaR.
Author: LeetQuiz Editorial Team
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In order to determine the most accurate approximation for the component Value at Risk (VaR) of a particular financial asset, consider the following data presented in the table. Using this information, calculate the component VaR for the asset.
A
JPY 4,787,000
B
JPY 6,320,000
C
JPY 7,299,000
D
JPY 11,562,000