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5 Cards in this Set
- Front
- Back
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16.66e: Macaulay Duration is an estimate of
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bond int rate sensitivity based on time, in years until promised CF's arrive.
Earliest measure of duration not appropriate estimate of the price sensitivity of bonds with embedded options |
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16.66e: Modified duration
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is derived from Macauly duration, improving on it by taking current YTM into account.
Not appropriate measure of bonds with embedded options. |
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16.66e: Graphically the price-yield curve is ______ _______ at higher yields
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Less steep
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16.66e: Three different ways to intrepret Duration
1. is the slope... 2. is a weighted average of the 3. preferred intrepretation |
1. of the price-yield curve at the bond's current YTM
2. of the time (in years) until each CF will be received, weights are proportions of the total bond value that each CF represents. 3. approx. % change in the price of bond for a 1% change in yield |
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16.66g: Convexity is a measure of...
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The curvature of the price-yield curve. The more curved the price-yield realtion, the greater the convexity.
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