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标题: Reading 40: Risk Management Applications of Swap Strategie [打印本页]

作者: tycoon 时间: 2008-9-16 17:35 标题: [2008] Session 13－Reading 40: Risk Management Applications of Swap Strategie

CFA Institute Area 8-11, 13: Asset Valuation
Session 13: Risk Management Applications of Derivatives
Reading 40: Risk Management Applications of Swap Strategies
LOS d: Determine the notional principal value needed on an interest rate swap to achieve a desired level of duration in a fixed-income portfolio.

作者: tycoon 时间: 2008-9-16 17:36

A manager of a $40 million dollar fixed-income portfolio with a duration of 4.2 wants to lower the duration to 3. The manager chooses a swap with a net duration of 2.1. What notional principal (NP) should the manager choose for the swap to achieve the target duration?

A) $70,000,000.
B)
$22,857,143.
C) $56,000,000.
D) $28,888,888.

Answer and Explanation

NP = $40,000,000 * (3 4.2) / -2.1

NP = $22,857,143

Since the manager wants to reduce the duration of his portfolio, he should take a receive-floating/pay-fixed position in the swap with that notional principal. Remember that a receive-floating swap has a negative duration, so we enter 2.1 in the equation.

NP = $22,857,143

作者: tycoon 时间: 2008-9-16 17:36

A manager of a $2 million dollar fixed-income portfolio with a duration of 3 wants to increase the duration to 4. The manager chooses a swap with a net duration of 2. The manager should become a:

A) pay-floating counterparty in the swap with a notional principal of $2 million.
B) receive-floating counterparty in the swap with a notional principal of $1 million.
C) receive-floating counterparty in the swap with a notional principal of $2 million.
D)
pay-floating counterparty in the swap with a notional principal of $1 million.

Answer and Explanation

To increase duration, the manager should be a pay-floating/receive-fixed counterparty in the swap with a notional principal equal to:

NP = $2,000,000 * (4 3) / 2

NP = $1,000,000.

NP = $2,000,000 * (4 3) / 2

NP = $1,000,000.

作者: tycoon 时间: 2008-9-16 17:37

If a fixed-income portfolio manager wants to double the duration of a portfolio with a swap that has the same duration as the portfolio, then the notional principal would be:

A) twice the value of the portfolio.
B) half the value of the portfolio.
C) any positive value, and they would all work.
D)
equal to the value of the portfolio.

Answer and Explanation

If we let V and D equal the current value and duration of the portfolio respectively, then we see that:

NP = V * (2*D D) / D = V

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