C is correct. We need to map the portfolio to a position in the underlying stock TUV. A deep in-the-money call has a delta of approximately 1, a deep out-of-the-money call has a delta of approximately zero and forwards have a delta of 1. The net portfolio has a delta (Dₚ) of about 15,000 + 020,000 + 1*10,000 = 15,000 and is approximately gamma neutral.

Let:
α = 2.326 (99% confidence level)
S = price per share of stock TUV = USD 52
Dₚ = delta of the position = 15,000
σ = volatility of TUV = 0.12

Therefore, the 1-day VaR estimate at 99% confidence level is computed as follows:
α * S * Dₚ * σ * sqrt(1/T) = (2.326)(52)(15,000)*(0.12/sqrt(252)) = USD 13,714.67

Learning Objective Describe the method of mapping forwards, forward rate agreements, interest rate swaps and options.

Reference Philippe Jorion, Value-at-Risk: The New Benchmark for Managing Financial Risk, 3rd Edition (New York: McGraw-Hill, 2007). Chapter 11 - VaR Mapping