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Basic Question 4 of 12
Consider the following portfolios comprised of 2-year, 5-year and 10-year zero-coupon bonds. D(n) is the key rate duration for the n-year part of the yield curve.
If the 2-year key rate shifts up 10 basis points and the 10-year rate shifts down 10 basis points, the value of the portfolio will change by ______.
User Contributed Comments 3
| User | Comment |
|---|---|
| Teeto | D(2) is 5, how comes its 0.5x(-10/100) ? D(10) is not present in the table. If D(3) is used instead of (D10) (why?) then total value considering the first line does not change. Chances are I got the question wrong. |
| sarasyed5 | see the values in the bottom most row @teeto |
| davidt87 | Teeto D(1) corresponds to the 2-year, D(2) to the 5-yr... etc. |
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Tamara Schultz
Learning Outcome Statements
explain how a bond's exposure to each of the factors driving the yield curve can be measured and how these exposures can be used to manage yield curve risks;
explain the maturity structure of yield volatilities and their effect on price volatility.
CFA® 2025 Level II Curriculum, Volume 4, Module 26.