Where did question number 5 come from ? The calculating equity return on CDO?? it’s no where in the lOS nor did I even see anything remotely close to this in the reading ??
ALSO, Question 13, why does duration increase if overnight repo is used opposed to the 2 year repo?
Anybody???
3rdtimesacharm? Wrote: ------------------------------------------------------- > ALSO, > > Question 13, why does duration increase if > overnight repo is used opposed to the 2 year repo? LOS a: evaluate the effect of leverage on portfolio returns? >Question 13, why does duration increase if overnight repo is used opposed to the 2 year repo? Net duration = Asset duration - liabilities duration so if overnight repo is used --> less negative --> net duration higher.
Question 5 - ignore, if it comes up in the exam, cry. Question 13. Dp = I DI - B DB / E two year has longer duration, over night has zero duration in itself the two year has a longer duration but when you insert this into the formula the duration of the bond reduces as DB increases. simples
yeah question 5 was weird, it was pretty much a level II question. I managed to get it, but I wouldn’t sweat it. It’s not really hard, just kinda a pain and relevent to nothing in the LOS IMO.