solution

In its trading portfolio, an FI holds 10,000 ExxonMobil (XOM) shares at a share price of $86.50 and has sold 5,000 General Electric (GE) shares under a forward contract that matures in one year. The current share price for GE is $20.50. The shift risk factor (i.e., standard deviation) for level 1 risk factor is 4 percent, for level II risk factor is 6 percent, for level III long positions is 9 percent, for level III short positions is  9 percent, and for nonhedgeable risk is 1 percent. Using the risk factors listed in Table 15–8 , calculate the market risk capital charge on these securities.