You invest in a 3-year AA rated corporate bond with a face value of $100 and a coupon rate of 6% (paid annually). The AA corporate yield curve is flat at 5%. Assume all shifts in the yield curve are parallel and that the distribution of 1 day changes in the rates are Use the duration approximation to get the VaR(20 day,99%) for this bond portfolio.
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
You invest in a 3-year AA rated corporate bond with a face value of $100 and a coupon rate of 6% (paid annually). The AA corporate yield curve is flat at 5%. Assume all shifts in the yield curve are parallel and that the distribution of 1 day changes in the rates are Use the duration approximation to get the VaR(20 day,99%) for this bond portfolio.
Step by step
Solved in 4 steps with 1 images
