Modified Duration

Описание к видео Modified Duration

We explain the concept of modified duration with the use of an example. We show how modified duration can be calculated by shocking the yield curve and pricing the bond at new yield as well as how we can make use of Macaulay duration to calculate modified duration. We show that for small changes in yield, modified duration does a good job at estimating change in bond price but measurement error gets larger with magnitue of change in yield. We graphically explain why modified duration will underestimate bond price if yield changes.

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