Fixed-rate bond VAR (Tail risk)

CFA Level III Fixed Income
#1

Hi to everyone,

In example 20 in Fixed income part, the expected yield change on a 99% confidence level is computed this way: 18.7 bps = (1.75% × 2.33 standard deviations × √21) to get the daily VAR. Where 1.75% is the daily SD.
How come they found 18.7 bps. The result is not in %?

Thanks

#2

Because they butchered it.

Daily VaR of 1.75% is huge; it should be 1.75 bps.

1 Like
#3

Thank you :+1: