Explanation:
The correct answer is D.
When positions are uncorrelated positions, the VaR of the portfolio is the square root of the sum of the squared VaRs:
\text{VaR}_p = \sqrt{10^2 + 40^2} \times (\$ \text{ million}) = \`$41.23`1 \text{ million}Ultimate access to all questions.
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Q.3146 A portfolio consists of two positions. The VaR of the two positions are $10 million and $40 million. Given that the returns of the two positions are not correlated, the VaR of the portfolio would be closest to:
A
$100 million
B
$300 million
C
$20 million
D
$41.23 million