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标题: Duration [打印本页]

作者: LPoulin133 时间: 2011-7-11 19:15 标题: Duration

Can someone explain why you have $100M in denominator, and not $125M? This is question 14 on page 151in CFAI.

" if we use funds from a $25 million overnight repo agreement to purchase bonds in addition to the current $100 million portfolio, the levered portfolio’s change in value for a 1% change in interest rates would equal $5,125,000 while giving you the portfolio duration you require."

作者: strikethree 时间: 2011-7-11 19:15

Since the 100 MM represents the equity in your portfolio...

作者: NakedPuts00 时间: 2011-7-11 19:15

The question asks for the duration of the portfolio, so the denominator is 100m.

This is a typical CFAI question, it actually gives you the leveraged portfolio's change in value for 1% rate change, and the amount of equity.

It seems tht it assumes the duration of liabilities (repo agreement) is 0. Please confirm...

Edited 1 time(s). Last edit at Sunday, May 8, 2011 at 04:42PM by deriv108.

作者: thommo77 时间: 2011-7-11 19:15

If repo is overnight the duration = 0
if 2-year repo, the duration is = 2

作者: Zestt 时间: 2011-7-11 19:15

Thanks!

Since the question asks "duration of the portfolio", shouldn't it be $125M since the portfolio is now $125M including the leverage of $25M? The question asks Duration of total portfolio, not just the equity portion of the portfolio. Also, is it really true that if the repo is 2-year then the Duration is 2?

I read every word on this topic in CFAI curriculum but still haven't found satisfactory explanation.

作者: bodhisattva 时间: 2011-7-11 19:15

No one else have problem with EOC Q14 on P151?

作者: Windjam 时间: 2011-7-11 19:15

deriv, do you have a job? I always see you on here.

作者: liangfeng 时间: 2011-7-11 19:15

bpdulog Wrote:
-------------------------------------------------------
> deriv108 Wrote:
> --------------------------------------------------
> -----
> > You should widen your confidence interval...
> >
>
> Is that your pickup line??

bpdulog, you're not wake2000...

"Be kind whenever possible. It is always possible".

作者: susana 时间: 2011-7-11 19:15

Ashwin Wrote:
-------------------------------------------------------
> Deriv108, the explanation by Jbaphna makes sense.
> If the duration of overnight portfolio is zero,
> then adding $25M to the denominator is not
> necessary. At least that is how I am going to try
> to remember this just in case if this kind of
> question shows up in the exam

Yes it is, because you have to prove to the grader you know $25 million times 0 is 0.

NO EXCUSES

作者: bkballa 时间: 2011-7-11 19:15

I have to give up on this one.

This could have been discussed in an earlier time -- now it's not a good time. Thank for raising this question,..., I did read those pages quite a few times. No need to review it till the day after 6/4.

Don't Fight CFAI.

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