GARP Exam 2016-FRR Topic 2 Question 6 Discussion

Actual exam question for GARP's 2016-FRR exam

Question #: 6
Topic #: 2

[All 2016-FRR Questions]

Sam has hedged a portfolio of bonds against a small parallel shift in the yield curve using the duration measure. What should Sam do to ensure that the portfolio is hedged against larger parallel shifts in the yield curve?

ATake positions to reduce the duration

BTake positions to increase the duration

CTake positions to make the convexity zero

DSince the portfolio is duration hedged Sam does not need to take additional positions.

Show Suggested Answer

Suggested Answer: C

by Gail at May 05, 2025, 09:18 PM

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Doug

2 days ago

Option D sounds right to me. If the portfolio is already duration hedged, Sam doesn't need to do anything else. No need to overcomplicate things.

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Michell

15 days ago

I think Sam should take positions to increase the duration. Larger shifts in the yield curve can have a bigger impact on the portfolio, so increasing the duration will help offset that.

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Goldie

26 days ago

I disagree, I believe Sam should take positions to reduce the duration.

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Catrice

1 months ago

I think Sam should take positions to increase the duration.

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