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Suppose that the change in a portfolio value for a one-basis-point shift in the 1-, 2-, 3-, 4-, 5., 7., 10-, and 30-year rates are
Suppose that the change in a portfolio value for a one-basis-point shift in the 1-, 2-, 3-, 4-, 5., 7., 10-, and 30-year rates are in $ millions) -3, -2,-1, +1, +3, +5, +7, and +8, respectively. Estimate the delta of the portfolio with respect to the first three Principal Component factors of the following Table. Quantify the relative importance of the three factors for this portfolio. Factor loadings PC1 PC2 PC3 PC4 PC5 PC6 PC7 PC8 1-year 0.22 -0.50 0.63 -0.49 0.12 0.24 0.01 -0.03 2-year 0.33 -0.43 0.13 0.35 -0.21 -0.67 -0.10 0.24 3-year 0.37 -0.27 -0.16 0.41 -0.10 0.31 0.41 -0.56 4-year 0.39 -0.11 -0.26 0.17 -0.02 0.55 -0.42 0.51 5-year 0.40 0.02 -0.36 -0.27 0.60 -0.28 -0.32 -0.33 7-year 0.39 0.19 -0.195 -0.34 0.01 -0.10 0.69 0.42 10-year 0.38 0.37 0.07 -0.31 -0.68 -0.04 -0.28 -0.28 30-year 0.31 0.55 0.58 0.40 0.33 0.02 0.01 0.03 PC1 17.55 PC2 4.77 Standard deviation of factor scores PC3 PC4 PC5 PC6 2.08 1.29 0.91 0.73 PC7 0.56 PC8 0.53 Suppose that the change in a portfolio value for a one-basis-point shift in the 1-, 2-, 3-, 4-, 5., 7., 10-, and 30-year rates are in $ millions) -3, -2,-1, +1, +3, +5, +7, and +8, respectively. Estimate the delta of the portfolio with respect to the first three Principal Component factors of the following Table. Quantify the relative importance of the three factors for this portfolio. Factor loadings PC1 PC2 PC3 PC4 PC5 PC6 PC7 PC8 1-year 0.22 -0.50 0.63 -0.49 0.12 0.24 0.01 -0.03 2-year 0.33 -0.43 0.13 0.35 -0.21 -0.67 -0.10 0.24 3-year 0.37 -0.27 -0.16 0.41 -0.10 0.31 0.41 -0.56 4-year 0.39 -0.11 -0.26 0.17 -0.02 0.55 -0.42 0.51 5-year 0.40 0.02 -0.36 -0.27 0.60 -0.28 -0.32 -0.33 7-year 0.39 0.19 -0.195 -0.34 0.01 -0.10 0.69 0.42 10-year 0.38 0.37 0.07 -0.31 -0.68 -0.04 -0.28 -0.28 30-year 0.31 0.55 0.58 0.40 0.33 0.02 0.01 0.03 PC1 17.55 PC2 4.77 Standard deviation of factor scores PC3 PC4 PC5 PC6 2.08 1.29 0.91 0.73 PC7 0.56 PC8 0.53
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