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If the period was the terminal period, the cash flows would have included the principal amounts as well, but the sum of the cashflows summed to total interest amount. So, that was not terminal period.

During that 5 weeks, var cannot be zero because a 30-trading day look back was being used, and 5 weeks translates to 25 trading days.. so some var should exist, likely to be lower. i chose an option which was different from these two, but i couldnt remember what it is. And, in case of...

Shouldnt it be policy-mix risk, because the two analysts are actually talking about the right mix of emerging market exposure in the portfolio (if i remember correctly, one analyst says larger allocation to emerging markets and the other analyst says lesser allocation because of tail risk). If...

The correlation increases with credit quality or with credit risk?, because LIBOR should decline if credit quality improves. And do you think this would hold true for all transactions. Maybe the client could be extremely creditworthy that correlation exists with OIS rather than LIBOR.

So, here we are measuring convexity as a difference in dollar amounts rather than difference in interest rates. Then why do we mention convexity in terms of bps. It should be $0.84 rather than 0.84bps, right?

@tanya: could you tell me the exact answer for the jensens inequality question as I am getting only 0.47bps and not any of the answers even going by the formula..

There was a question about which of the options would reduce the VaR of a short position in 3x9 FRA.. The options were like decrease/increase in correlation between 3-month and 9-month treasury bills, increase in volatility of 3-month bill. I am not sure what the answer is.

Hi, could anyone tell me how the answer for convexity using jensens inequality is arrived at. The 1-yr spot rate now is 5% and 1-yr rate one year from now is expected to be either 4% or 6%. I couldnt get either 0.86 or 1.82. Thanks.