All Questions
5
questions
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
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
2
answers
741
views
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 ...
- 2,542
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
2
votes
1
answer
795
views
From continuous compounding to simple compounding - convexity adjustment
I have derived the convexity adjustment expression for futures rates using the Ho-Lee model, to arrive at the following:
$$
ForwardRate = FuturesRate - \frac{1}{2}\sigma^2T_1T_2
$$
where $T_1$ refers ...
- 223