Financial Risk Manager Part 1
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| (A) Bond | (B) Value (USD) | (C) Modified Duration | (D) (B × C) | (E) (D/B) |
|---|---|---|---|---|
| 1 | 4,000,000 | 7.5 | 30,000,000 | |
| 2 | 2,000,000 | 1.6 | 3,200,000 | |
| 3 | 3,000,000 | 6 | 18,000,000 | |
| 4 | 1,000,000 | 1.3 | 1,300,000 | |
| SUM | 10,000,000 | 52,500,000 | 5.25 |
The portfolio modified duration is 5.25. This is obtained by multiplying the value of each bond by the modified duration(s), then taking the sum of these products, and dividing it by the value of the total bond portfolio.
The change in the value of the portfolio will be -10,000,000 × 5.25 × 0.1% = -52,500