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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?

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Suggested Answer: C

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

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Nadine
1 months ago
You know, I once heard a joke about a bond trader who tried to hedge against yield curve shifts by building a wall around his portfolio. Didn't work out too well for him. Anyway, I'm going with option B too.
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Rickie
1 months ago
I think D is the correct answer, since the portfolio is already duration hedged.
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Verlene
1 months ago
Haha, I bet Sam wishes he could just make the convexity zero and call it a day! But that's not how it works, is it? Gotta go with option B to increase the duration.
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Rory
15 days ago
User 3: Making the convexity zero would be too easy, option B is the way to go.
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Clay
18 days ago
User 2: Yeah, that's the way to hedge against larger parallel shifts in the yield curve.
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Annamae
28 days ago
User 1: Sam should take positions to increase the duration.
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Vicente
1 months ago
I think Sam should take positions to make the convexity zero.
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Doug
2 months 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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Nakita
22 days ago
User 2: Agreed, if the portfolio is already duration hedged, there's no need for additional positions.
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Tamera
24 days ago
User 1: I think option D is the best choice here.
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Michell
2 months 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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Lou
1 months ago
Since the portfolio is duration hedged, maybe Sam doesn't need to take additional positions after all.
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Cherrie
1 months ago
Taking positions to make the convexity zero could also be a strategy to consider.
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Julieta
1 months ago
But wouldn't reducing the duration also be a good option to hedge against larger shifts?
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Domingo
2 months ago
I agree, increasing the duration would help protect the portfolio against larger shifts.
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Goldie
2 months ago
I disagree, I believe Sam should take positions to reduce the duration.
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Catrice
3 months ago
I think Sam should take positions to increase the duration.
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