# Question

A company has a long position in a two-year bond and a three-year bond as well as a short position in a five-year bond. Each bond has a principal of $100 and pays a 5% coupon annually. Calculate the company’s exposure to the one-year, two-year, three-year, four-year, and five-year rates. Use the data in Tables 8.7 and 8.8 to calculate a 20-day 95% VaR on the assumption that

rate changes are explained by (a) one factor, (b) two factors, and (c) three factors. Assume that the zero-coupon yield curve is flat at 5%.

rate changes are explained by (a) one factor, (b) two factors, and (c) three factors. Assume that the zero-coupon yield curve is flat at 5%.

## Answer to relevant Questions

A company has a position in bonds worth $6 million. The modified duration of the portfolio is 5.2 years. Assume that only parallel shifts in the yield curve can take place and that the standard deviation of the daily yield ...Estimate the capital required under Basel I for a bank that has the following transactions with another bank. Assume no netting. (a) A two-year forward contract on a foreign currency, currently worth $2 million, to buy ...A trader buys 200 shares of a stock on margin. The price of the stock is $20. The initial margin is 60% and the maintenance margin is 30%. How much money does the trader have to provide initially? For what share price is ...Consider a European call option on a non-dividend-paying stock where the stock price is $52, the strike price $50, the risk-free rate is 5%, the volatility is 30%, and the time to maturity is one year. Answer the following ...The worksheet used to produce Figure 23.2 is on the author’s web site. How does the loss distribution change when the loss severity has a beta distribution with upper bound of 5, lower bound of zero, and the other ...Post your question

0