foundation

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foundation

Postby anbu.edu » Wed Oct 09, 2013 10:53 am

What assumptions does a duration-based hedging scheme make about the way in which interest rates move?
I. A small parallel shift occurs in the yield curve.
II.Interest rates movements are highly correlated.
III. Any parallel shift occurs in the term structure.
IV. All interest rates change by the same amount.
Choose one answer.
a. II only Correct
b. II & IV Incorrect
c. I & III Incorrect
d. II & III Incorrect
The correct answer is A.
The assumption is that of (1) parallel and (2) small moves in the yield curve.
Incorrect

the statement is contradicting ... can you please explain is answer A correct?

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