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Visit www.edupristine.com to download more spreadsheets from our Xcel in
Fixed Income Analysis Workbook Series
Fixed Income Analysis
Measuring Yield Curve Risk
In this workbook, you will learn the three broad structures of portfolio
management abd how an uneven shift in yield curve effects the value of a debt
portfolio.
Visit www.edupristine.com to download more spreadsheets from our Xcel in
Fixed Income Analysis Workbook Series
Fixed Income Analysis
Measuring Yield Curve Risk
In this workbook, you will learn the three broad structures of portfolio
management abd how an uneven shift in yield curve effects the value of a debt
portfolio.
Question
Consider 3 zero coupon bonds as described below:








What is the effect on portfolio value of each portfolio when:
1 year yield had shifted up 100bps
5 year yield had shifted up 50bps
10 year yield had shifted up 100bps
Measuring Yield Curve Risk
Duration Ladder
Constituents
1 Year Issue 1 30
5 Year Issue 5 30
10 Year Issue 10 40
Portfolio Amount 100
Duration Calculation
Effective Duration 5.80
Duration component of 1 Year Issue 0.30
Duration component of 5 Year Issue 1.50
Duration component of 10 Year Issue 4.00
Effects of Non-Parallel Shifts in Key Rates
1 Year Issue 100 bps 0.30
5 Year Issue 50 bps 0.75
10 Year Issue 100 bps 4.00
Value of the Portfolio after Key Rate Shifts 94.95
Barbell Bullet
45 15
10 70
45 15
100 100
5.45 5.15
2.45 0.77
0.55 3.61
2.45 0.77
2.45 0.77
0.27 1.80
2.45 0.77
94.82 96.65
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10
20
30
40
1 Year Issue
5 Year Issue
10 Year Issue
Ladder Portfolio
-
20
40
60
80
1 Year Issue
5 Year Issue
10 Year Issue
Bullet Portfolio
10 Year Issue
-
10
20
30
40
50
1 Year Issue
5 Year Issue
10 Year Issue
Barbell Portfolio
10 Year Issue