Unformatted text preview: (7) b) Calculate the 99% 1-day VaR of your position. (8) c) Using Marginal Risk Decomposition, decompose the VaR into the risk contributions from the exposure to the 0.5-year interest rate and the 1-year interest rate for our zero coupon exposures. (5) Important: In answering question c, keep in mind that in the absence of price changes and price volatilities for bond investments, the risk factor impacting on our bond is a combination of the duration and the yield change and volatility . With this in mind, you should be able to adjust the marginal risk decomposition formula you used for equities accordingly....
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- Summer '09
- Finance, 1-year, 1-Day, marginal risk decomposition, 0.72 5.22%