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  1. Nicole Seaman

    YouTube T4-42: Fixed Income: Duration and Convexity Summary

    In this playlist, David has already recorded at least ten videos on duration and convexity which are the two most common measures of single-factor interest rate risk. So, in this video, we wrap it up in one simple explanation that tries to illustrate both duration and convexity and how we apply...
  2. Nicole Seaman

    YouTube T4-39: Fixed Income: Impact of Yield and Coupon on Duration and DV01

    The previous videos in this playlist have illustrated how we calculate the two most popular measures of single factor interest rate sensitivity, that is duration and dv01, also called price value of the basis point. Now, knowing how these calculations work we will apply them to understand some...
  3. Nicole Seaman

    YouTube T4-38: Fixed Income: Duration plus convexity to approximate bond price change

    Duration plus a convexity adjustment is a good estimate (approximation) of the bond's price change. We can express this change in percentage terms(%) as given by ΔP/P = -D*Δy + 0.5*C*(Δy)^2; or we can express this in dollar terms ($) as given by ΔP =∂P/∂y*Δy + 0.5*∂^2P/∂y^2*(Δy)^2.
  4. Branislav

    Hull, Instructional video , ch4 -Duration

    Dear David, Thanks a lot for video lectures they are much inspiring Still I was little bit confused with all these different names duration, modified duration, Macauly duration,.. etc...I will shortly examine mine view of this and kindly ask you to comment ( but without laughing:)) According to...
  5. J

    The price sensitivity of bonds is measured using convexity, duration..

    Please, could you anyone explain me why the convexity increase at an increasing rate as duration increase. I think that the duration should be decrease at an increasing rate. Best regards
  6. Nicole Seaman

    P2.T5.715. Fixed-income portfolio mapping approaches (principal, duration, and cash-flow) (Jorion)

    Learning objective: Differentiate among the three methods of mapping portfolios of fixed income securities. Questions: 715.1. Consider a $200.00 million portfolio that is equally allocated between two bonds: the first bond pays a 5.0% annual coupon and matures in five years; the second bond...
  7. David Harper CFA FRM

    Interest Rate Risk Modeling 2017-09-06

    This is technical but one of the most robust reviews of duration and convexity that you can find. For example Chapter 2 Bond Price, Duration and Convexity Bond Price under Continuous Compounding Duration Convexity Common Fallacies Concerning Duration and Convexity Simple Counter Examples...
  8. Nicole Seaman

    P1.T3.715. Par yield, convexity and term structure theories (Hull Chapter 4)

    Learning objectives: Calculate the change in a bond’s price given its duration, its convexity, and a change in interest rates. Compare and contrast the major theories of the term structure of interest rates Questions: 715.1. Consider the following continuously compounded zero (spot) rate curve...
  9. Nicole Seaman

    P1.T3.714. Duration, modified duration and dollar duration (Hull Chapter 4)

    Learning objectives: Calculate the duration, modified duration, and dollar duration of a bond. Evaluate the limitations of duration and explain how convexity addresses some of them. Questions 714.1. A very risky two-year bond with a face value of $100.00 pays a semi-annual coupon of 18.0% and...
  10. P

    GARP.FRM.PQ.P1 Doubts with DV01. (garp09)

    Assuming other things constant, bonds of equal maturity will still have different DV01 per USD 100 face value. Their DV01 per USD 100 face value will be in the following sequence of highest value to lowest value: a. Zero coupon bonds, par bonds, premium bonds b. premium bonds, par bonds, zero...
  11. N

    Example Tuckman 2011, page 156, Compute Key-Rate 01...

    Hello everyone I watched David Harper's videos on Key Rate 01, but he uses spot rates, not par rates like in the example of Tuckman. I have problems understanding that example, maybe someone is kind enough to enlighten me a little? 1. Why are par rates used as key rates and not spot rates? Is...
  12. David Harper CFA FRM

    FRM Fun 11. Do we really need all three durations? let's settle this now!

    FRM Fun 11. The Macaulay duration is the weighted average maturity of a bond, where the weights are the present values (as a percentage of the bond's price) of the cash flow. Hull's Table 4.6 below illustrates this nicely; the Macaulay duration of his 3-year bond is 2.653 years, which the sum...
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