An investor is considering the portfolio impact of a new 12-year corporate bond position with a $75

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An investor is considering the portfolio impact of a new 12-year corporate bond position with a $75 million face value, a 3.25% coupon, current YTM of 2.85%, modified duration of 9.887, and a price of 104.0175 per 100 of face value.


What is the approximate VaR for the bond position at a 99% confidence interval (equal to 2.33 standard deviations) for one month (with 21 trading days) if daily yield volatility is 1.50% and returns are normally distributed?

A. $1,234,105

B. $2,468,210

C. $5,413,133

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Fixed Income Analysis

ISBN: 9781119850540

5th Edition

Authors: Barbara S. Petitt

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