The Firm's U.S. dollar sensitivities are presented in the table below. 2018 2017 $ 1.7 0.9 $ (2.1) (3.6) December 31, (in billions) Parallel shift: +100 bps shift in rates -100 bps shift in rates Steeper yield curve: +100 bps shift in long-term rates -100 bps shift in short-term rates Flatter yield curve: +100 bps shift in short-term rates -100 bps shift in long-term rates 0.5 0.7 (1.2) (2.2) 0.4 1.0 (0.9) (1.4) 1. Assuming JPMorgan is using duration convexity model to calculate their sensitivity test. Comment on the leverage adjusted duration gap of JPMorgan in 2018 use Parallel shift scenario. Show your work. (10 marks) 2. From Table 4.1, we know the leverage adjusted convexity gap of JPMorgan is negative. Given the same leverage adjusted duration, which of the following scenarios would be preferred by a bank: [1] negative leverage adjusted convexity gap [2] zero leverage adjusted convexity gap [3] positive leverage adjusted convexity gap. Explain your answer. Use graphs to illustrate your solution. (10 marks) The Firm's U.S. dollar sensitivities are presented in the table below. 2018 2017 $ 1.7 0.9 $ (2.1) (3.6) December 31, (in billions) Parallel shift: +100 bps shift in rates -100 bps shift in rates Steeper yield curve: +100 bps shift in long-term rates -100 bps shift in short-term rates Flatter yield curve: +100 bps shift in short-term rates -100 bps shift in long-term rates 0.5 0.7 (1.2) (2.2) 0.4 1.0 (0.9) (1.4) 1. Assuming JPMorgan is using duration convexity model to calculate their sensitivity test. Comment on the leverage adjusted duration gap of JPMorgan in 2018 use Parallel shift scenario. Show your work. (10 marks) 2. From Table 4.1, we know the leverage adjusted convexity gap of JPMorgan is negative. Given the same leverage adjusted duration, which of the following scenarios would be preferred by a bank: [1] negative leverage adjusted convexity gap [2] zero leverage adjusted convexity gap [3] positive leverage adjusted convexity gap. Explain your answer. Use graphs to illustrate your solution. (10 marks)