［2008］Topic 30: Key Rate and Bucket Exposures相关习题 describes, following, entire, manner

Baran

AIM 2: Describe the application of the key-rate shift analysis.

1、Which of the following best describes key rate duration? Key rate duration is determined by:

A) shifting the whole yield curve in a parallel manner.
 
B) shifting the whole yield curve linearly.
 
C) changing the curvature of the entire yield curve.
 
D) changing the yield of a specific maturity.

Baran

The correct answer is A

This is how an analyst uses key rate durations: For a given change in the yield curve, each rate change is multiplied by the associated key rate duration. The sum of those products gives the change in the value of the portfolio. If only the five-year interest rate changes, for example, then the effect on the portfolio will be the product of that change times the five-year key rate duration.

Baran

2、You are using key rate shifts to model the term structure of interest rates. For key rates you have chosen the 1-year, 7-year, and 20-year yields. The effect on the 10-year yield of a 10 basis point increase in the 7-year yield is closest to a:

A) 10 basis point increase.
 
B) 7.7 basis point increase.
 
C) 5 basis points increase.
 
D) 2.3 basis points increase.

Baran

The correct answer is B

The 10 bp shock to the 7-year yield is assumed to decline linearly to zero for the 20-year yield. Thus, the shock decreases 10/13 bp per year, resulting in a 10 bp – (10-7)(10/13)=7.7 bp increase for the 10-year yield.

Baran

AIM 9: Explain the main differences between the key rate shift and the bucket shift approach to manage interest rate risks.

 

1、Which of the following statements in regards to key rate shifts and bucket shift approaches is FALSE?

A) Key rate shifts incorporate a relatively small number of key rates in its analysis.
 
B) The bucket shift approach uses many potential effects within a section of the yield curve.
 
C) The bucket shift approach assumes non-parallel changes in forward rates in the section of the yield curve under investigation.
 
D) Key rate shifts assume changes in rates in and around the chosen key rates.
 

Baran

The correct answer is C

The bucket shift approach assumes parallel changes (not non-parallel changes) in forward rates in the section of the yield curve under investigation.

Baran

The correct answer is D

Key rate duration can be defined as the approximate percentage change in the value of a bond or bond portfolio in response to a 100 basis point change in a key rate, holding all other rates constant, where every security or portfolio has a set of key rate durations, one for each key rate maturity point.

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2、An analyst is using key rate shifts to model the term structure of interest rates. For key rates the analyst has chosen the 1-year, 7-year, and 20-year yields. The rate changes that will have an effect on a 5-year bond are:

A) 1-year and 7-year.
 
B) 1-year, 7-year, and 20-year.
 
C) 1-year.
 
D) 7-year.

Baran

The correct answer is A

The adjacent key rates will have an impact on the 5-year bond yield.

Baran

AIM 3: Define, calculate, and interpret key rate 01 and key rate duration.

1、An analyst has a list of key rate durations for a portfolio of bonds. If only one interest rate on the yield curve changes, the effect on the value of the bond portfolio will be the change of that rate multiplied by the:

A) key rate duration associated with the maturity of the rate that changed. 
 
B) median of the key rate durations. 
 
C) weighted average of the key rate durations. 
 
D) simple average of the key rate durations.