hi Sir, in the convexity example I noticed 2 things 1. we are given modified duration shouldn't we convert it to Duration before using it to calculate price change? 2. Why did we multiply 200 million - I thought its portfolio value and not the price? Thanks.
@analystprep
4 жыл бұрын
Hi. So we're using modified duration because modified duration is a measure of a bond price sensitivity to changes in its yield to maturity. Macaulay duration, on the other hand, is the weighted average time before a bondholder would receive the bond's cash flows. We multiply by the value of the portfolio to get the value of the position change. If we were not multiplying by the 200 million, we would get the change in a 1$ portfolio value for every 50 basis point change. I hope this helps. Let us know if we can do anything else for you.
@burgerexplosion1346
4 жыл бұрын
Hi Sir, thanks for this! Around the 8 minute mark in the Compounding Frequencies section, I’m not sure if I’m missing something but shouldn’t m be multiplied to the right side of the expression to get R? After multiplying both sides with e, we get: e^Rc = e ^m x (1 + (R/m)) e^Rc/e^m = 1 + (R/m) e^(Rc/m) = 1 + (R/m) e^(Rc/m) - 1 = R/m Switch sides R/m = e^(Rc/m) - 1 Then R = m x [e^(Rc/m) - 1] Many thanks as always!
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