On P31 under 4.1.1.6 SD is defined as : “a measure of how the market value of a risky bond (portfolio) will change with respect to a parallel 100 bps change in its spread above the comparable benchmark securities (portfolio)” My question is how to calculate the SD ? Can anyone explain more tangibly by raising an example ?
What I mean is : how to calculate (get) the SDs of each sector of the bonds. For example, how to get the SD of 6.45 for “Agencies” as indicated in Exhibit 5 on P19 ? Anyone can help ?
This is outside the scoope of the exam, but I would imagine it would be the same as the duration calc for an individual bond just with the price changes being based on spread widening and narrowing rather than level changes.
notenoughtheta Wrote: ------------------------------------------------------- > This is outside the scoope of the exam, but I > would imagine it would be the same as the duration > calc for an individual bond just with the price > changes being based on spread widening and > narrowing rather than level changes. This calculation was on the exam last year, so unless the LOS has changed it is not outside the scope of the exam.