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Hi,

I am confused on the difference in how John Hull (John Hull Example 4.6) and Tuckman (Tuckman Table 4.6) calculates their Macaulay duration in order to determine the modified duration.

In John Hull's example, he uses continuous compounding to determine present value of the cash flows and calculates the Mac duration. He then uses the continously compounded Mac duration value 2.653 (which is calculated under continuous compounding) and calculates the modified duration under semi-annual compounding frequency.

In Tuckman's Table 4.6, he uses semi-annual compounding to determine the present value of the cash flows and calculates the Mac duration. He then uses its value calculate the modified duration under semiannual compounding frequency.

Since the mac duration is needed in order to calculate the modified duration under semi-annual frequency, which method is correct? Should the present value of the cash flows be discounted by continously compounding or semi-annual compounding to first determine the mac duration?

I am confused on the difference in how John Hull (John Hull Example 4.6) and Tuckman (Tuckman Table 4.6) calculates their Macaulay duration in order to determine the modified duration.

In John Hull's example, he uses continuous compounding to determine present value of the cash flows and calculates the Mac duration. He then uses the continously compounded Mac duration value 2.653 (which is calculated under continuous compounding) and calculates the modified duration under semi-annual compounding frequency.

In Tuckman's Table 4.6, he uses semi-annual compounding to determine the present value of the cash flows and calculates the Mac duration. He then uses its value calculate the modified duration under semiannual compounding frequency.

Since the mac duration is needed in order to calculate the modified duration under semi-annual frequency, which method is correct? Should the present value of the cash flows be discounted by continously compounding or semi-annual compounding to first determine the mac duration?

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