• Initial Portfolio 1-day 95% VaR: Using the portfolio VaR formula: $\sqrt{VaR_C^2 + VaR_E^2 + 2 \times \rho \times VaR_C \times VaR_E}$ $= \sqrt{2.5^2 + 2.5^2 + 2 \times 0.47 \times 2.5 \times 2.5} = \sqrt{18.375} = 4.2866$ million.

• Rebalanced Positions: New Canadian position = $72 - 20 = 52$million. New Emerging position = `$58` + 20 = 78$million. Assuming volatility is unchanged, VaR scales linearly with position size: New 1-day 95$VaR_C = 2.5 \times \frac{52}{72} = 1.8056$million. New 1-day 95$VaR_E = 2.5 \times \frac{78}{58} = 3.3621$ million.

• New Portfolio 1-day 95% VaR: $= \sqrt{1.8056^2 + 3.3621^2 + 2 \times 0.47 \times 1.8056 \times 3.3621} = \sqrt{20.2718} = 4.5024$ million.

• Adjusting to 10-day 99% VaR: Conversion factor = $\frac{Z_{99\%}}{Z_{95\%}} \times \sqrt{10} = \frac{2.326}{1.645} \times \sqrt{10} = 1.414 \times 3.1623 = 4.4715$. New 10-day 99% VaR = $4.5024 \times 4.4715 = 20.132$ million.

• Change in VaR: Change = New 10-day 99% VaR - Old 1-day 95% VaR $= 20.132 - 4.2866 = 15.845$ million.

Option D matches this calculation perfectly. (Note: Option C represents the new absolute portfolio VaR, but the question asks for the change).