Question

In its trading book, a financial institution holds 20,000 shares of enbridge inc. (valued at $50 per share) and 40,000 shares of manulife financial corporation (valued at $25 per share), and has sold 7,500 shares of transcanada corporation (valued at $60 per share) through a forward contract that matures in a year. the shift risk factor (standard deviation) is 3% for level i worldwide equity risk, 5% for level ii equity risk, 8% for level iii long individual stock positions, -8% for level iii short individual stock positions, and 1% for non-hedgeable risk. calculate the market risk capital charge on the bank's trading book. can i get a step by step solution please.

Answer 1

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