Hi,
On pg 169
EXAMPLE 2
Using Partial Durations to Estimate Portfolio Sensitivity to
a Curve Change
Assume Haskell revises his yield curve forecast as shown in Exhibit 34: Yields
for the 2- year through 10- year maturities each decline by 5 bps, and the yield
for the 30- year maturity increases by 23 bps.
Exhibit 34-A Steeper and Less Curved Yield Curve
Yield Curve Shift
Maturity BeginningCurve Ending Curve Curve Shift
2 Year 0.816 0.767 –5.0
3 Year 0.987 0.937 –5.0
5 Year 1.345 1.296 –5.0
7 Year 1.649 1.600 –5.0
10 Year 1.935 1.885 –5.0
30 Year 2.762 2.991 23.0
2s–30s Spread 1.946 2.224 28.0
2/10/30 Butterfly spread 0.292 0.012
Using the data from Exhibit 34, we compare the partial durations of the two
portfolios Haskell is considering:
Key Rate PVBPs Total 1 Year 2 Year 3 Year 5 Year 10 Year 20 Year 30 Year
Pro forma portfolio (1) 0.0587 0 0.0056 0.0073 0.0126 0.0127 0.0014 0.0191
More barbelled portfolio (2) 0.0585 0 0.0096 0.0040 0.0074 0.0119 0.0018 0.0238
Qns: Could anyone advise the how do we obtain 20-year PVBPs under Pro forma portfolio (1):0.0014 and More barbelled portfolio (2): 0.0018 as it missing from Exhibit 34.
Thanks in advance