Questions from Financial Management

Q: What are the convexities of the portfolios in Problem 9.17

What are the convexities of the portfolios in Problem 9.17? Problem 9.17: Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10-year zero-coupon bond with a face...

Q: An investment bank has been asked to underwrite an issue of 10

An investment bank has been asked to underwrite an issue of 10 million shares by a company. It is trying to decide between a firm commitment where it buys the shares for $10 per share and a best effor...

Q: Estimate the interest rate paid by P&G on the 5

Estimate the interest rate paid by P&G on the 5/30 swap in Business Snapshot 5.4 if (a) the CP rate is 6.5% and the Treasury yield curve is flat at 6% and (b) the CP rate is 7.5% and the Treasury yi...

Q: Suppose that the change in a portfolio value for a one-

Suppose that the change in a portfolio value for a one-basis-point shift in the 1-year, 2-year, 3-year, 4-year, 5-year, 7-year, 10-year, and 30-year rates are (in $ millions) +5, –3, –1, +2, +5, +7, +...

Q: Suppose that the price of an asset at close of trading yesterday

Suppose that the price of an asset at close of trading yesterday was $300 and its volatility was estimated as 1.3% per day. The price at the close of trading today is $298. Update the volatility estim...

Q: Suppose that the parameters in a GARCH (1, 1)

Suppose that the parameters in a GARCH (1, 1) model are = 0.03, = 0.95, and  = 0.000002. (a) What is the long-run average volatility? (b) If the current volatility is 1.5% per day, what is your e...

Q: The probability that the loss from a portfolio will be greater than

The probability that the loss from a portfolio will be greater than $10 million in one month is estimated to be 5%. (a) What is the one-month 99% value at risk (VaR) assuming the change in value of th...

Q: Suppose that the price of Asset X at close of trading yesterday

Suppose that the price of Asset X at close of trading yesterday was $300 and its volatility was estimated as 1.3% per day. The price of X at the close of trading today is $298. Suppose further that th...

Q: The change in the value of a portfolio in three months is

The change in the value of a portfolio in three months is normally distributed, with a mean of $500,000 and a standard deviation of $3 million. Calculate the VaR and ES for a confidence level of 99.5%...

Q: The probability that the loss from a portfolio will be greater than

The probability that the loss from a portfolio will be greater than $10 million in one month is estimated to be 5%. (a) What is the one-month 99% VaR assuming the change in value of the portfolio is n...