All Questions
11
questions
0
votes
1
answer
76
views
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
$$\text{convexity} = \frac{\text{Macaulay duration}^2 + \text{Macaulay duration} + \text{dispersion}}{(1+\...
- 281
2
votes
2
answers
592
views
Quantifying the impact of rates change on bond prices
How can I quantify the impact of a change in interest rates on bond prices?
I know that in a classical textbook setting the answer would be to compute the modified duration of the bond and, to account ...
- 45
1
vote
2
answers
240
views
Are there names from the third term onwards in the Taylor approximation for bond pricing?
The first terms are duration and convexity, but are there common names for the terms beyond this?
- 11
0
votes
1
answer
90
views
Duration and convexity of an open term loan/bond!
Imagine an open term loan with monthly interest payments of [x]% and the principle due when the loan is closed. Both the lender can call the loan, and the borrower can return the loan (with no penalty)...
- 1
1
vote
1
answer
509
views
Duration and Convexity
I am searching to estimate the evolution of my portfolio duration following a yield increase/decrease.
Can i use the convexity?
I mean IR delta x (- convexity) = Duration delta
Is it correct?
Thanks a ...
0
votes
0
answers
549
views
How to calculate the new price of a bond using duration rule and duration with convexity rule?
A bond with a 30 year maturity, par value of $1000 and is 8% p.a. coupon is selling at an yield to maturity of 8% p.a. The modified duration of the the bond at its yield is 11.26%, and its convexity ...
1
vote
1
answer
2k
views
High convexity vs low convexity bond definition
Isn't high convexity always better than low convexity bond from the formula that $$\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 ...
- 111
3
votes
0
answers
685
views
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 ...
- 205
0
votes
2
answers
644
views
Bond Duration hedging with long convexity
How do you build a duration-neutral bond portfolio which is long convexity? can you give me an example?
- 255
-3
votes
2
answers
1k
views
Why Is Bond Time Value Risk Not Considered in Bond Immunization?
I know bond portfolio immunization includes duration and (if the hedging period is longer) convexity matching. These are equivalent to taking the first and second partial derivatives of the bond ...
- 2,806
0
votes
2
answers
481
views
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 ...
- 3