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(Solved) 15.20 A company has a position in bonds worth $6 million. The modified duration of the portfolio...


15.20     A company has a position in bonds worth $6 million. The modified duration of the portfolio is 5.2 years. Assume that only parallel shifts in the yield curve can take place and that the standard deviation of the daily yield change (when yield is measured in percent) is 0.09. Use the duration model  to estimate the  20-day 90% VaR  for the  portfolio. Explain carefully the  weaknesses of  this approach to calculating VaR. Explain two alternatives that give more accuracy.

 


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