A portfolio manager is mapping a fixed-income portfolio into exposures on selected risk factors. The manager is analyzing the comparable mechanics and risk measurement outputs of principal mapping, duration mapping, and cash-flow mapping that correspond to the average portfolio maturity. Which of the following is correct?
A. Principal mapping considers coupon and principal payments, and the portfolio VaR using principal mapping is greater than the portfolio VaR using cash-flow mapping.
B. Duration mapping does not consider intermediate cash flows and the portfolio VaR using duration mapping is less than the portfolio VaR using principal mapping.
C. Cash-flow mapping considers the timing of the redemption cash flow payments only, and the portfolio VaR using cash flow mapping is less than the portfolio VaR using duration mapping.
D. Cash-flow mapping considers the present values of cash flows grouped into maturity buckets, and the undiversified portfolio VaR using cash-flow mapping is greater than the portfolio VaR using principal mapping.
My question is: Does undiversified VaR (Cash Flow) always lower than VaR (Duration) ? would that be possible to be higher?