Which of the following statements is true?
A)Daily price volatility is calculated as the price sensitivity to a small change in yield multiplied by the adverse daily yield move.
B)Daily price volatility is calculated as the negative modified duration of a security multiplied by the adverse daily yield move.
C)The daily price volatility of a security influences how much an FI might lose in case of adverse market movements.
D)All of the listed options are correct.

Question

Quizplus · Accepted Answer

All the statements accurately describe aspects of how daily price volatility is calculated and its implications for financial institutions (FIs). Statement A defines daily price volatility in terms of price sensitivity and yield changes. Statement B explains it as the product of negative modified duration and yield changes, which is another valid method of calculation. Statement C highlights the practical impact of daily price volatility on potential losses for FIs due to market movements.

Which of the Following Statements Is True