Key Rate duration profile for treasury bond portfolio:
Key Rate Portfolio A Portfolio B Portfolio C
3 mths 0.3 0.2 0.9
2 yrs 0.4 0.2 0.9
5 yrs 0.4 2.3 1.1
10 yrs 3.6 0.3 0.9
20 yrs 0.5 0.3 1.0
30 yrs 0.4 2.3 0.8
Which portfolio will perform worst if interest rates increase in a positive butterfly twist fashion.
Shouldn’t the answer be portfolio C since it has high key rate duration for shorter and longer term maturity bonds and is otherwise known as barbell portfolio.作者: hariRaj 时间: 2013-4-19 07:28
this is always tricky when they are talking about Butterflly movements since you don’t know the extent of the butterfly. In a butterfly, the very begining and the very end of the curve are the most affected so let’s assume that rate 3 months and 30 years are the most affected, then it would be portfolio B the most affected since 2.3+0.2 is bigger than 0.8+0.9作者: ramdabom 时间: 2013-4-19 07:33
