Consider 1-factor model and assume that the price of a certain fixed income security P(y) for...
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Consider 1-factor model and assume that the price of a certain fixed income security P(y) for y=6%, 6.08% and 5.92% is given by P(0.06)-$20,000; P(0.0608)-$19,800; P(0.0592)=$20,230. a) Find the estimate for DV01, Duration, and Convexity of this security. Keep at least 4 decimal digits while performing your calculations. b) Using the Taylor' second-order approximation, estimate the price of the security when y=6.2%. Round your answer to the nearest cent. Problem 4 Consider 1-factor parallel yield shift model with a flat structure of forward rates y. Assume currently y=8%. How many 5-year zero-coupon bonds you need to sell to hedge a portfolio of 1000 of 9-year zero-coupon bonds. Round your answer to the nearest integer number of bonds Consider 1-factor model and assume that the price of a certain fixed income security P(y) for y=6%, 6.08% and 5.92% is given by P(0.06)-$20,000; P(0.0608)-$19,800; P(0.0592)=$20,230. a) Find the estimate for DV01, Duration, and Convexity of this security. Keep at least 4 decimal digits while performing your calculations. b) Using the Taylor' second-order approximation, estimate the price of the security when y=6.2%. Round your answer to the nearest cent. Problem 4 Consider 1-factor parallel yield shift model with a flat structure of forward rates y. Assume currently y=8%. How many 5-year zero-coupon bonds you need to sell to hedge a portfolio of 1000 of 9-year zero-coupon bonds. Round your answer to the nearest integer number of bonds
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a DV01 dollar value of a basis point can be calculated as DV01 P006P00592200004 10000 Duration can ... View the full answer
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