Question

Sumitomo Bank's risk manager has estimated that the DEARs of two of its major assets in its trading portfolio, foreign exchange and bonds, are -$150,000 and -$250,000, respectively.

What is the total DEAR of Sumitomo's trading portfolio if the correlation among assets is assumed to be 0.80?

A. -$100,000.

B. -$291,548.

C. -$350,000.

D. -$380,789.

E. -$400,000.

Answer

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