medium · FRM Part 2 Market Risk
A 10-year corporate bond is being mapped to a set of government yield curve vertices for VaR purposes.
Which mapping method would best capture the risk of a yield curve 'steepening' where the 10-year rate rises more than the 2-year rate?
- Duration mapping to the 10-year vertex.
- Principal mapping to the 10-year vertex.
- Cash-flow mapping to multiple vertices.
- Mapping the bond to a single equity index proxy.
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