Financial Risk Manager Part 1
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A trading portfolio consists of two bonds, A and B. Both have modified duration of 3 years and face value of USD 1000, but A is a zero-coupon bond and its current price is USD 900, and bond B pays annual coupons and is priced at par. What do you expect will happen to the market prices of A and B if the risk-free yield curve moves up by 1 basis point?
A trading portfolio consists of two bonds, A and B. Both have modified duration of 3 years and face value of USD 1000, but A is a zero-coupon bond and its current price is USD 900, and bond B pays annual coupons and is priced at par. What do you expect will happen to the market prices of A and B if the risk-free yield curve moves up by 1 basis point?
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