So I'm short a GBP denominated zero-coupon bond which has a face value of 1 million pounds and a remaining maturity of 6 months. Furthermore, I have to assume that the daily return of a 6-month zero GBP bond has a volatility of 0.06% (when its price is converted into Euro). The current exchange rate is 0.88 Pound Sterling per Euro and the 6-mont interest rate in GBP is 5% per annum with continuous compounding.
I now have to calculate the 10-day 99% relative normal VaR of this investment and as a hint, I have that I must start by defining the volatility of the P1L of my investment. However, I'm not sure how I can solve this particular exercise as I haven't really worked with the VaR with different currencies.