In its trading portfolio, a U.

In its trading portfolio, a U.S. FI is long £20 million worth of pound FX forward contracts and has sold €40 million of euro FX forward contracts that mature in one year. The current exchange rate of dollars for pounds is $1.5625 and the exchange rate of euros for pounds is $1.25 at the daily close. The shift risk factor (i.e., standard deviation) for level 1 risk factor is 5 percent, for level II risk factor for pounds is 8 percent, and for level II risk factors for euros is 12 percent. Using the risk factors listed in Table 15–8 , calculate the market risk capital charge on these securities.

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