# 2009 Schweser Exam Vol.1 Exam 1 PM - Spread Duration

Question 14 - 3&4 A table is given with 4 bonds and their sector effective duration Q3: Given a parallel shift in the yield curve of 60bp for the treasury yields, the approx. percent change in the value of the portfolio is - they take the percent weight of the bond in the portfolio and multiply with the respective effective duration and using the total duration, multiply it with 60bp to get the answer. I understand this part. Q4: If the OAS for all bond sectors changes by 60bp while Treasury yields remain unchanged, the approx. percent change in the portfolio is: they do the same thing as above. The explanation given: the spread duration for non-treasuries are the same as their effective durations. the calculation and resulting change from a uniform widening of 60bp in all spreads is the same as if the yield curve has shifted 60bp with no change in the spreads. I am not able to understand it. So is OAS the same as spread duration? Why is that? Thanks

You are thinking too much into it. Just assume that they are the same in the problem.

sparty419 Wrote: > > The explanation given: the spread duration for > non-treasuries are the same as their effective > durations. the calculation and resulting change > from a uniform widening of 60bp in all spreads is > the same as if the yield curve has shifted 60bp > with no change in the spreads. > Here is my guess-- They really try to say “…the spread duration for non-treasuries are the same as their effective durations IN THIS CASE…” So it is a case statement instead of a general rule. I think the wording is bad on their part.

I see, I have been reading up on it and sort of understand now. Yea, like you said, its probably problem-specific here. Thanks

i hated that question. It wasn’t written clearly in my book. that whole exam was rough if you ask me.