hard · FRM Part 1 Valuation and Risk Models
In the context of yield curve modeling, a 'butterfly' shift occurs where short-term and long-term rates rise while intermediate-term rates fall.
Which portfolio would be most negatively impacted by this shift?
- A portfolio with zero effective duration and zero key-rate durations.
- A bullet portfolio with high KRD_10y.
- A barbell portfolio with high KRD_2y and high KRD_30y.
- A portfolio with equal KRDs across all maturities.
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