Duration Is a Less Accurate Predictor for the Change in an FI's

question 17

Multiple Choice

Duration is a less accurate predictor for the change in an FI's net worth in case of large interest rate shocks because it assumes a:

• A)linear relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is convex
• B)linear relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is concave
• C)convex relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is linear
• D)concave relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is linear

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Definitions:

Continuous Section Break

In document formatting, a break that seamlessly continues the document flow onto the next section without starting a new page.

Vertical Position

The vertical alignment or location of an object, text, or element on a page or screen, relative to a defined reference point.

Horizontal Position

The location of an object based on its placement along the horizontal axis from a fixed point of reference.

Continuous Section Break

A formatting mark in word processing software that creates a seamless transition between sections, allowing for changes in formatting without starting a new page.