Finally suppose that you do not want to take too much risk


Finally, suppose that you do not want to take too much risk and decide to invest in bond markets. There are two zero-coupon bonds. In particular, suppose that you own 0.5m of a bond maturing at T1 = 5 Years with annualized yield volatility σ1 = 0.05 and 1m of a bond maturing at T1 = 30 Years with an annualized yield volatility σ1 = 0.10. The correlation between yields on the two bonds is 0.6. Compute the 1 week VaR of your portfolio.

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Financial Management: Finally suppose that you do not want to take too much risk
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