To measure the interest rate risk by re-valuing the bond or portfolio for a given interest-rate change scenario, referred to as a scenario analysis. Work well for periodic reports but impractical for managing risk of large portfolio.
Steps:
1. Start with current market yield and price
2. Estimate chagnes in yields
3. Revalue bonds
4. Compare new value to current value
It take the changes in cash flows into account.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment