What is the 99 worst-case cost of unwinding in the future


Suppose that a trader has bought some illiquid shares. The trader has 100 shares of A, quoted at bid $50 and offer $60, and 200 shares of B, quoted at bid $25 and offer $35. What are the proportional bid-offer spreads? What is the impact of the high bidoffer spreads on the amount it would cost the trader to unwind the portfolio? If the bidoffer spreads are normally distributed with mean $10 and standard deviation $3, what is the 99% worst-case cost of unwinding in the future as a percentage of the value of the portfolio?

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Financial Management: What is the 99 worst-case cost of unwinding in the future
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