# Estimating market risk measures

Discussion in 'P2.T5. Market Risk (25%)' started by Imad, Jul 26, 2012.

1. ### ImadMember

Hi David

Hope you are well. Appreciate if you could explain below example taken from Qbank. I couldn't understand the relation btwn PVBP and VAR?

Thanks
Imad

Question 11 - #29487
The price value of a basis point (PVBP) of a $20 million bond portfolio is$25,000. Interest rate changes over the next one year are summarized below:
Change in Interest rates
Probability
>+2.50%
1%
+2.00-2.49%
4%
0.00-1.99%
50%
-0.99-0.00%
45%
<-1.00%
5%
Compute VAR for the bond portfolio at 95 percent confidence level.
A)
$2,500,000. B)$2,750,000.
C)
$5,000,000. D)$12,500.

3. ### Aleksander HansenWell-Known Member

Just another example of why Bionic Turtle is superior in terms of practice questions:
1) Correct answer
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3) Rapid response, with an intuitive, easy-to-understand answer.

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