All Questions
Tagged with fixed-income convexity
20
questions
0
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76
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Proving that Convexity approx. equals Duration squared but something goes wrong?
I am trying to derive a formula for bond convexity that I saw in a textbook which states that
$$\text{convexity} = \frac{\text{Macaulay duration}^2 + \text{Macaulay duration} + \text{dispersion}}{(1+\...
- 11k
9
votes
1
answer
1k
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Bond convexity Treasuries futures
I know that long-duration bonds, on a a single bond basis, exhibit convexity. However, do Treasuries futures prices and the 10 year yield exhibit the same property?
Below is a plot of continuous 10 ...
- 1,046
1
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2
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240
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Are there names from the third term onwards in the Taylor approximation for bond pricing?
The first terms are duration and convexity, but are there common names for the terms beyond this?
CommunityBot
- 1
2
votes
2
answers
592
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Quantifying the impact of rates change on bond prices
How can I quantify the impact of a change in interest rates on bond prices?
I know that in a classical textbook setting the answer would be to compute the modified duration of the bond and, to account ...
- 12.6k
4
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1
answer
264
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How am I supposed to understand the following statement on the convexity adjusted rate
Given, a numéraire $(N(t))_{0\leq t \leq T}$ and an index $(X(t))_{0\leq t\leq T}$ that is a $\mathbb Q^{N}$-martingale, we consider the natural payoff $V_{N}(T)$, where it pays
$$V_{N}(T):=X(T)N(T) \...
- 14.7k
1
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1
answer
3k
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Derivation of convexity formula
Let's say that I have a bond that pays coupon on a semi-annual basis. Therefore, the price of this bond can be calculated using the following formula:
$$ P = \sum_{i=1}^N \frac{CF_i}{(1 + YTM/2)^{...
CommunityBot
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1
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90
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Duration and convexity of an open term loan/bond!
Imagine an open term loan with monthly interest payments of [x]% and the principle due when the loan is closed. Both the lender can call the loan, and the borrower can return the loan (with no penalty)...
- 421
1
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1
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509
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Duration and Convexity
I am searching to estimate the evolution of my portfolio duration following a yield increase/decrease.
Can i use the convexity?
I mean IR delta x (- convexity) = Duration delta
Is it correct?
Thanks a ...
- 1,211
0
votes
0
answers
549
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How to calculate the new price of a bond using duration rule and duration with convexity rule?
A bond with a 30 year maturity, par value of $1000 and is 8% p.a. coupon is selling at an yield to maturity of 8% p.a. The modified duration of the the bond at its yield is 11.26%, and its convexity ...
2
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1
answer
2k
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Proof of the convexity adjustment formula
Let $y_0$ be the forward bond yield observed today for a forward contract with maturity $T$, $y_T$ be the bond yield at time $T$, $B_T$ be the price of the bond at time $T$ and let $\sigma_y$ be the ...
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5
votes
1
answer
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Why does a barbell portfolio have higher convexity than a bullet porfolio
I cannot quite understood absolutely why a barbell portfolio has higher convexity than a bullet porfolio.
I can easily understand how the parallel line represents duration but I cannot see what the ...
- 184
1
vote
2
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741
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Bond Convexity and Maturity
What the reasoning for why bond convexity increases with maturity. Heuristic explanations are somewhat better as I would like a fundamental understanding.
Also what causes a more convex bond to be ...
- 9,382
1
vote
1
answer
2k
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High convexity vs low convexity bond definition
Isn't high convexity always better than low convexity bond from the formula that $$\frac {ΔB} B=-D \frac {Δy} {1+y} + \frac 1 2 CΔy^2$$
Since $\frac 1 2 CΔy^2$ is positive no matter what so the price ...
- 5,682
0
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2
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481
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Duration vs. Convexity Contradiction
A lower coupon bond exhibits higher duration, which means higher price volatility with changing YTM.
A lower coupon bond also exhibits higher convexity. However, with higher convexity, bond prices ...
- 196
3
votes
0
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685
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Modified duration and convexity of a bond in R
A soft question:
Are there any existing packages in R that allows one to compute the modified duration and convexity of bonds in R? If there isn't, how can one go about doing so (with formulas) with ...
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