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Q.2906 What is the netting factor of 9 independent transactions that have equal volatility supposing the average correlation between them is zero? | Financial Risk Manager Part 2 Quiz - LeetQuiz

Explanation:

From the netting factor formula that has been given:

\text{Netting factor} = \frac{\sqrt{n + n(n - 1)\rho}}{n}

For $\rho = 0$ , the formula reduces to:

\text{Netting factor} = \frac{\sqrt{n}}{n} = \frac{1}{\sqrt{n}}

We are given that $n = 9$ . Therefore:

\text{Netting factor} = \frac{1}{\sqrt{9}} = \frac{1}{3} = 33.33\%

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Q.2906 What is the netting factor of 9 independent transactions that have equal volatility supposing the average correlation between them is zero?

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