Financial Risk Manager Part 1

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Explanation:

Explanation

To calculate effective duration, we use the formula:

\text{Effective Duration} = \frac{V_- - V_+}{2 \times V_0 \times \Delta y}

Where:

First, we need to find $V_0$ . Since the portfolio value changes symmetrically around the initial value:

V_0 = \frac{V_- + V_+}{2} = \frac{127.723 + 122.164}{2} = \frac{249.887}{2} = 124.9435 \text{ million}

Now calculate duration:

\text{Effective Duration} = \frac{127.723 - 122.164}{2 \times 124.9435 \times 0.003} = \frac{5.559}{2 \times 124.9435 \times 0.003}

= \frac{5.559}{0.749661} = 7.414

The closest answer is 7.38 (Option A).

Explanation:

To calculate effective duration, we use the formula:

\text{Effective Duration} = \frac{V_- - V_+}{2 \times V_0 \times \Delta y}

Where:

First, we need to find $V_0$ . Since the portfolio value changes symmetrically around the initial value:

V_0 = \frac{V_- + V_+}{2} = \frac{127.723 + 122.164}{2} = \frac{249.887}{2} = 124.9435 \text{ million}

Now calculate duration:

\text{Effective Duration} = \frac{127.723 - 122.164}{2 \times 124.9435 \times 0.003} = \frac{5.559}{2 \times 124.9435 \times 0.003}

= \frac{5.559}{0.749661} = 7.414

The closest answer is 7.38 (Option A).

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Last updated: December 18, 2025 at 14:03

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