Explanation:
\text{VaR} = \sqrt{\`67^2 + \32`^2 + (2 \times \`67 \times \32` \times 0.4)} = \sqrt{7228.2} = \`85.02` \text{ million}$
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Q.3147 Debra Jeniffer is a commodity trader at Venus Investment, a large hedge fund domiciled in the Cayman Islands. While analyzing the trade positions for the fund, she computes the VaR of gold futures contract at $67 million and the VaR of palladium contract at $32 million. If the correlation between changes in commodity prices is 0.4, then what is the combined VaR?
A
$99.00 million
B
$85.02 million
C
$74.24 million
D
$35.00 million