Table of Contents
Chapter 11
Managing Fixed Income Securities: Basic Strategies
Bond Pricing Relationships
Bond Pricing Relationships (cont.)
Duration
Duration: Calculation
Duration Calculation
Consider a 5-year, 10% coupon bond. Yield = 14%.
Duration/Price Relationship
Approximating price changes
Estimating price sensitivity
Using duration and convexity to estimate price changes.
Convexity
Uses of Duration
Target date immunization
Target date immunization
Immunization and rebalancing
Other approaches
Active Bond Management: Swapping Strategies
Interest rate swap
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