Financial Risk Manager Part 1

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Answer: The VaR is approximately $334,186

This calculation uses the delta-normal approach for bond VaR. First, the yield VaR is calculated using the z-score (2.33 for 99% confidence), yield volatility (2%), and time scaling (10 days). Then the price VaR is calculated using duration (3.6) and the bond value ($10,000,000) multiplied by the yield VaR.

Author: LeetQuiz Editorial Team

Quick Answer

Answer-first summary for fast verification

Answer: The VaR is approximately $334,186

This calculation uses the delta-normal approach for bond VaR. First, the yield VaR is calculated using the z-score (2.33 for 99% confidence), yield volatility (2%), and time scaling (10 days). Then the price VaR is calculated using duration (3.6) and the bond value ($10,000,000) multiplied by the yield VaR.

Author: LeetQuiz Editorial Team

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$\text{VaR(dy)} = 2.33 \times 2\% \times \sqrt{\frac{10}{252}} = 0.0093$ $\text{VaR(dP)} = 3.6 \times 10,000,000 \times 0.0093 = 334,186$

Exam-Like

0

A

The VaR is approximately $334,186

100.0%

B

The VaR is approximately $93,000

0.0%

C

The VaR is approximately $1,000,000

D

The VaR is approximately $500,000

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Financial Risk Manager Part 1

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Quick Answer

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VaR(dy)=2.33×2%×10252=0.0093\text{VaR(dy)} = 2.33 \times 2\% \times \sqrt{\frac{10}{252}} = 0.0093VaR(dy)=2.33×2%×25210​​=0.0093 VaR(dP)=3.6×10,000,000×0.0093=334,186\text{VaR(dP)} = 3.6 \times 10,000,000 \times 0.0093 = 334,186VaR(dP)=3.6×10,000,000×0.0093=334,186

$\text{VaR(dy)} = 2.33 \times 2\% \times \sqrt{\frac{10}{252}} = 0.0093$ $\text{VaR(dP)} = 3.6 \times 10,000,000 \times 0.0093 = 334,186$