We want to calculate the value at risk for a consol bond. The annual payments of the consol bond are 100 CHF. The current interest rate in Switzerland is 5%. The current exchange rate is (0.70 AUD) / (1 CHF). a) Calculate the present value of the of the consol bond in CHF.
b) The volatility of the bond price (in CHF) is OB = 10 and the volatility of the exchange rate is ofx = 0.005. The generated random variables are Variable Draw 1 Draw 2 Draw 3 Draw 4 ZB 0.542 -1.353 0.676 0.894 2FX 1.834 3.035 -1.208 -1.147 Draw 5 -0.103 -0.241 Variable Draw 6 Draw 7 Draw 8 Draw 9 Draw 10 ZB -2.258 0.725 0.717 -1.069 0.319 | 2FX -1.307 -0.205 1.035 | 1.438 -0.030 Calculate the simulated bond prices in CHF. c) Calculate the simulated exchange rates. d) Calculate the simulated bond prices in AUD. e) Calculate the value at risk for a = 10%.
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