j*****o
发帖数: 6 | 1 We say that duration is bond price sensitivity to interest rate. But really
which interest rate? Does a change in any point within the entire yield
curve (i.e. any interest rate change) will affect the price of a particular
bond? or only rates with shorter terms than the bond maturity matters?
If we express bond price as P(r), then this "r" seems to be the internal
rate of return, and the duration is just the first order Taylor expansion
for P(r) around this "r". So the interest rate affects th | S*****x
发帖数: 20 | 2 I think it's bond yld.
really
particular
【在 j*****o 的大作中提到】
: We say that duration is bond price sensitivity to interest rate. But really
: which interest rate? Does a change in any point within the entire yield
: curve (i.e. any interest rate change) will affect the price of a particular
: bond? or only rates with shorter terms than the bond maturity matters?
: If we express bond price as P(r), then this "r" seems to be the internal
: rate of return, and the duration is just the first order Taylor expansion
: for P(r) around this "r". So the interest rate affects th
| n*****r
发帖数: 159 | 3 Duration, by its name, is the averaged-time to get cash back.
for Bullet bonds, Modified duration can gauge the relation between bond
price change and yield change. and in this case ONLY, Duration is the first
term in Taylor expansion of P(y). the second term is convexity.
But for bonds with embedded options (callable corporate bond, mortgages, ABS
), the relation between Duration and bond price breaks down. And people
often use effective duration.
really
particular
【在 j*****o 的大作中提到】
: We say that duration is bond price sensitivity to interest rate. But really
: which interest rate? Does a change in any point within the entire yield
: curve (i.e. any interest rate change) will affect the price of a particular
: bond? or only rates with shorter terms than the bond maturity matters?
: If we express bond price as P(r), then this "r" seems to be the internal
: rate of return, and the duration is just the first order Taylor expansion
: for P(r) around this "r". So the interest rate affects th
| a*****r
发帖数: 1539 | 4 Usually ppl consider bond price sensitivity to 10year rates. For different
points on the yield curve, you can caluculate partial duration for each
point.
really
particular
【在 j*****o 的大作中提到】
: We say that duration is bond price sensitivity to interest rate. But really
: which interest rate? Does a change in any point within the entire yield
: curve (i.e. any interest rate change) will affect the price of a particular
: bond? or only rates with shorter terms than the bond maturity matters?
: If we express bond price as P(r), then this "r" seems to be the internal
: rate of return, and the duration is just the first order Taylor expansion
: for P(r) around this "r". So the interest rate affects th
| j*****o
发帖数: 6 | 5 en~ this makes sense. Thanks!
【在 a*****r 的大作中提到】
: Usually ppl consider bond price sensitivity to 10year rates. For different
: points on the yield curve, you can caluculate partial duration for each
: point.
:
: really
: particular
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