Non-Parallel Term Structure Hedging and Binomial Trees
Free GARP FRM Part I lesson in Valuation and Risk Models. 21 min read, ~3,155 words.
Principal components analysis (PCA) of yield-curve changes finds that the first three components, level, slope, curvature, explain 95%+ of the variance in U.S. Treasury daily yield changes. Key-rate duration (KRD) measures price sensitivity to a shift at one specific maturity, holding other key rates fixed. KR01 is the dollar price...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
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