How to find optimal row and optimal column in a
nonstrictly determined game explain with at least 2 examples (one
must be at least 3x3 matrix) and how to find the value (in a
determined game, I remember, the value is the saddle value). will
rate positive if u make the cut.
Explain the concept of duration.
Why is duration is thought of as a measure of risk?
If duration is a measure of risk, what would you do if interest
rates are expected to rise (assume you want to be fully invested in
bonds). Would you buy bonds with shorter or longer durations?
Many banks have a duration mismatch between their assets and
their liabilities. Explain why this duration mismatch arises and
how swaps can be used to manage the interest rate risk caused by
this duration mismatch.
How is the equilibrium interest rate determined in the bond
market? Explain why the interest rate will move toward equilibrium
if it is temporarily above or below the equilibrium rate.
HW 10
Explain the Phillips Curve. Illustrate (that means graph) how
the curve would shift if there was stagflation and prosperity. What
does the long run Phillips look like? Why? Be specific.