Thanks, tigerbill.The paper seems to be very useful.

<t>We have the following question and hope to seek your advice. Thanks in advance.---------------------------------------------------------------------------------------------------------We want to calculate the VaR of a portfolio containing- USA Treasury Bonds- USD Interest Rate Derivatives- German...

<t>Really thanks, jomni. I agree with you. I am uncertain whether it is acceptable to price the FRN based on the BBB zero rate yield curve. Is it acceptable in market practice?By the way, could anyone advise me how to price a reverse floater?For example, coupon = 18% - 2 x 3-Month LIBOR.It is easy w...

<t>The results should not be significantly different.Actually, what I want to know is which method is appropriate, not the exact value.Some people say that it should be priced based on LIBOR + spread as the coupon rate is LIBOR + 100 bp. Is it true? From another view, the cost of fund of a BBB compa...

<t>Suppose a company with credit rating BBB issues a floating rate note (3-month LIBOR + 100 bp paid quarterly).Suppose I have bought the above FRN with principal 1MData:- Today is 1-Aug-2005- Next coupon date = 1-Sep-2005- Next coupon rate = 6%How to revalue the value of the above note if the credi...

<t>For equity linked deposit, what is the effect of paying dividend?Suppose today is 26 Jul 2005 and AAA is a stock with current price, $100.I enter the following equity linked deposit contract- Linked stock = AAA- The strike equity price percentage = 95 %.- Tender = 1 month, i.e. maturity date = 26...

What are "One-way cash payments due under OTC derivative transactions"?Any example?Really thanks!

Aaron, thanks so much!!

<t>Thanks, Aaron for clarifying "terms of interest rate"Would anyone give me suggestion to name the rate in a corporate zero-coupon yield curve? "zero-coupon yield", "spot rate"?Originally, I want to name it zero-coupon yield. However, it seems rather long. Next, I want to name it as "spot rate". Ho...

<t>QuoteOriginally posted by: Aaron .... Different interest rate models use different relations between spot rates and term rates, but some rough sort of expectations has to apply, that is the 10-year rate today can't be too much different from the expected average spot rate over then next 10 years....

<t>Does the fluctuation of the yield spread depend on market risk, credit risk or both?This question is raised because I don’t know the VaR calculated based on the BBB yield has included the specific risk or not (suppose the portfolio has only BBB bond). If it has not included the specific risk, I n...

Thanks for Balaji’s correction and leonardoalmeida’s information.Suppose I just have the risk-free yield data and the yield spread data. How can I better apply this data to do the parametric VaR calculation? Method 1 or Method 2 as I described before. Any recommedation?Really thanks.

Aaron, thanks for your explaination. By the way, why is “AGGREGATE TIME PERIODS” a good practice?Thanks.

<t>Thanks, leonardoalmeida. Your suggestion is valuable. I understand that Monte Carlo simulation is a full valuation to calculate the portfolio VaR and with it, we can neglect the problem of correlation among the risk factor.However, I need to use the parametric approach to calculate the portfolio ...

<t>Hi, Aaron. I am interested in your answer.ABOUT (a3+a4+a5)--------------------------In the first paragraph, “you might have a single point equal to a3+a4+a5". What is the meaning of “a3+a4+a5”? And, what is the meaning of “b3*(a3+a4+a5)+b4*(a3+a4+a5)+b5*(a3+a4+a5)”?ABOUT THE GOOD PRACTICE (AGGREG...