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Joined: Sat Jun 25, 2016 8:13 am


Postby mayankmundhra30 » Mon Sep 26, 2016 1:43 pm

There are some doubts.

1) What is value required to hedge a key rate exposure of $27.5 with another security with key rate exposure of $9.75, both having similar face value?
Choose one answer.
a. 35.45 Incorrect
b. 282.05 Correct
c. 37.25 Incorrect
d. 268.13 Incorrect
The correct answer is B
F = 282.05 [(27.50/ 9.75)*100]

What is the use of value 100?

2) Empirically, a nominal yield would adjust by more than ____ basis point for every basis point adjustment in real yield.
Choose one answer.
a. zero Incorrect
b. one Correct
c. ten Incorrect
d. hundred Incorrect

Explain the logic behind this.

3) A Wall Street investor has long exposure in US Treasury bond to the extent of $50.0 million. The investor hedges his exposure by shorting a US Treasury TIPS (treasury inflation protected security) to the extent of $44.9 million. Kindly recommend whether the hedge needs to be adjusted if the nominal yield changes by 1.0137 basis points per basis point of real yield change.
Choose one answer.
a. Buy additiona l TIPS by $ 0.62 million Incorrect
b. Sell existing TIPS by $ 0.62 million Correct
c. Sell existing TIPS by $ 4.42 million Incorrect
d. Adjustment not required

how to do this?

4) Please explain pricipal component analysis?

Finance Junkie
Posts: 946
Joined: Wed Apr 09, 2014 6:28 am


Postby edupristine » Mon Oct 03, 2016 5:03 am

Hi Mayank
Principal component analysis (PCA) is a technique used to emphasize variation and bring out strong patterns in a dataset. It's often used to make data easy to explore and visualize.

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