Explanation:
Portfolio value after a 30 year shift = 900.525 − (−0.598) = 901.123
KR duration for a 30 year shift =
=
= −6.641
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Q.75 A risk manager prepares a presentation on the interest rate risk of the bank’s bond portfolio. The table below shows the value of the portfolio in cases of key rate shifts and corresponding key rate '01s.
| Value | Key Rate '01 | |
|---|---|---|
| Initial Curve | 900.525 | |
| 2-year Shift | 898.950 | 1.5750 |
| 5-year Shift | 900.302 | 0.2230 |
| 10-year Shift | 889.112 | 11.4130 |
| 30-year Shift | ? | −0.5980 |
| Total | 12.613 |
What are the portfolio’s value and key rate duration for a 30-year shift?
A
Portfolio’s value = 901.123; Key rate duration = -6.641
B
Portfolio’s value = 899.927; Key rate duration = -6.641
C
Portfolio’s value = 899.927; Key rate duration = 135.090
D
Portfolio’s value = 899.927; Key rate duration = -9.119
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