6 Questions
Increasing or decreasing all the implied volatilities used for an asset by 50% of current values is an example of a scenario where there is a large move in one variable and other variables are unchanged.
True
The impact of small changes in a variable is measured by its gamma, as explained in Chapter 8.
False
It is reliable to estimate the change in the value of a portfolio using Greek letters when considering changes that are so large.
False
What are examples of scenarios where there is a large move in one variable and other variables are unchanged?
- A 100-basis-point parallel shift (up or down) in a yield curve. 2. Increasing or decreasing all the implied volatilities used for an asset by 50% of current values. 3. Increasing or decreasing an equity index by 10%. 4. Increasing or decreasing the exchange rate for a major currency by 6%. 5. Increasing or decreasing the exchange rate for a minor currency by 20%.
How is the impact of small changes in a variable measured?
The impact of small changes in a variable is measured by its delta.
When is it likely to be unreliable to estimate the change in the value of a portfolio using Greek letters?
When considering changes that are so large.
Test your knowledge of financial scenarios with this quiz. Explore different scenarios, such as yield curve shifts, changes in implied volatilities, and adjustments in equity index or exchange rates.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
