Best estimate of the portfolio daily var


A portfolio consists of two zero coupon bonds, each with a current value of $10. The first bond has a modified duration of one year and the second has a modified duration of nine years. The yield curve is flat, and all yields are 5%. Assume all moves of the yield curve are parallel shifts. Given that the daily volatility of the yield is 1%, which of the following is the best estimate of the portfolio daily VAR at the 95% confidence level?

A. USD 1.65

B. USD 2.33

C. USD 1.16

D. USD 0.82

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Finance Basics: Best estimate of the portfolio daily var
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