What is the implied standard deviation of daily yield change

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Reference no: EM132762965

Blue Bank has an inventory of Standard and Poor's equivalent AAA-rated, 8-year zero-coupon bonds with a face value of $250 million. The bonds are currently at a yield to maturity in the over-the-counter market of 3.5%.

problem (i) What is the modified duration of these bonds?

problem (ii) What is the percentage price volatility if the potential adverse move in yield is 7 basis points?

problem (iii) What is the DEAR and the VAR if the management of Blue believe that it will take 5 days to liquidate their position?

problem (iv) If the price volatility is based on a 95 percent confidence limit and a mean historical change in daily yields of 0.0 percent what is the implied standard deviation of daily yield changes measured in basis points?

Reference no: EM132762965

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