Freida Pinto… Jai Ho!
the show NY Wrote: ------------------------------------------------------- > Where it is done as a % of par value is below: > > > Given the following information, which bond has > the greater interest rate risk and what is the > change in price if rates increase by 50 basis > points? > > > > Par Market Price > PVBP per $1,000 par value > > Bond A 2,000,000 1,987,500 0.885 > > Bond B 7,000,000 8,588,250 1.025 > > > > A) Bond B, change in price = - $88,500. > > B) Bond B, change in price = - $358,750. > > C) Bond A, change in price = - $358,750. > > > Your answer: A was incorrect. The correct answer > was B) Bond B, change in price = - $358,750. > > PVBP (price value of a basis point) is the > absolute value of the change in bond value for a 1 > basis point change in yield. > Change in price = -PVBP × change in basis point x > par in thousands > Bond A = -0.885 × 50 × 2,000 = -88,500 > Bond B = -1.025 × 50 × 7,000 = -358,750 Can you give me the question number for this one from QBank. I did the one that skillionaire mentioned (Thanks - good practice that was) and was always under the impression that we used market value weighted and not par value. weight_security = (Market Value of Security)/(Portfolio market value)
question # 8 8 4 3 5 this threw me off too because im used to it being done with MV. however, i think they used par because of the PVBP, not sure
I don’t see them using par in QBank question: 88435 They have correclty used Market values and have calculated the weighted average of the durations of the bonds to get the portfolio duration. See question#4 for reference in that vignette.
swaption, very sorry, i copied and pasted you the qbank question # of the one that DID use market value. the one that uses par value is 88409. this ones just a short question, no item set. let me know if you try it out. thanks.
that question uses par bcos PVBP per 1000$ par is provided.
I practice, it makes more sense to use the market values to get weights. Zero-coupon bonds, CMO z-tranches, PAC CMO support tranches, ABS junior tranches, and CDO equity tranches are usually discounted heavily - Sorry, I listed those for reviewing the FI topics.
the show NY Wrote: ------------------------------------------------------- > swaption, > > very sorry, i copied and pasted you the qbank > question # of the one that DID use market value. > > the one that uses par value is 88409. this ones > just a short question, no item set. > > let me know if you try it out. > > thanks. Just did the question - That one used par values because the PVBP given was “per $1000 par value”. So we have to multiply by par value only. So market values is a way to go.
bump. useful qbank question in here.