I don’t really remember the numbers but I remember that I had no clue how to do this. They gave you something about 260 days and asked for the price in 8 months.
this was confidence interval for bond??? No f’in clue… Went with the guess the middle numbers theory
260^(1/2) times your vol std deviation times that by your given vol, times by 2 because it was 95% confidence interval
i took .7(sqrt 260)(1.96)
was the upper bound 3.22% or was that for the whole year. I think I didnt pay attention to the 8 months. I did sqrt(256) x daily volatility and then multiplied that by 1.95. Is this the same problem?
so we were give dalily volatility convert it to annual yield= daily * sqrt of 260 then take the bond yield * annual yield = basis points change 95% interval = bond yield ± ( 2* basis points change) ----- 2 because 95% CI has 2 std deviations the answer was A - based on above which schweser has in the notes
TheAliMan Wrote: ------------------------------------------------------- > 260^(1/2) times your vol std deviation > > times that by your given vol, times by 2 because > it was 95% confidence interval correct … i guess the trick here was 95% is 2SD and not 1SD… there was an answer option that was satisfying 1SD too…
yep fucked this one up
C? man re-reading these bring back bad memories.
you forgot to adjust that BrokenSocialScene by the relative vol… i.e. 3% x sqrt(260) x (1.99). then do a +/- off the 3%.
adalfu Wrote: ------------------------------------------------------- > you forgot to adjust that BrokenSocialScene by the > relative vol… i.e. > > 3% x sqrt(260) x (1.99). then do a +/- off the > 3%. yeah, i forgot to mention the 3± part
Finally, confirmation of 1 right answer! At least I know I didn’t get a 0 on this one.
sebrock Wrote: ------------------------------------------------------- > was the upper bound 3.22% or was that for the > whole year. I think I didnt pay attention to the 8 > months. I did sqrt(256) x daily volatility and > then multiplied that by 1.95. Is this the same > problem? This is what I found as the answer 2.78 - 3.22.
koch: absolutely correct answer to this question was C
I dont remember the 8 month part - I chose C which was 3.22% for the upper bound.
the upper bound should be 3.67 % here is the calculation daily yield given= .7% therefore annual yield = .7%*sqrt(260)=11.28% yield = 3% so total bp change = 3*11.28 for 1 std deviation = 33.84 bps so the upper bound for 95% = 3% + ( 2*33.84/100) = 3.67% lower bound 3% - ( 2*33.84/100) = 2.32%
yeah, 3.22 is around right. I remember I asked similiar question in AF couple days before exam:D So happy I did, still remember one answer tells me there are actually 252 trading days per year, haha