VaR Continued...

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VaR Continued...

Postby swarnendupathak » Sat Nov 03, 2012 12:47 am

(A) Roughly what is the VaR of a CAD 100 mn with 10 year Canadian govt. bond if the extreme move for the 10-Year Canadian rate is 40 bp.
(a) 3000000
(b) 7000000
(c) 100000000
(d) 70000

Please help...the correct answer mentioned is (a), please let me know the concept for getting the correct answer.

(B) Can u please highlight how to calculate VaR by using DVO1....???



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Re: VaR Continued...

Postby content.pristine » Mon Nov 05, 2012 8:56 pm

1) The Duration of a 10 year bond would be around 7.5 years. (I like to give you an approximation if no other data is given that the duration should be estimated to 3/4 of the maturity)

= 7.5 * .004 * 100,000,000 = 3Mn

2) If DV01 is given, this makes your life much easier to calculate VaR.
Just multiply DV01 by the number of basis points given at that VaR.


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