Study Session 16: Fixed Income: Analysis of Risk
See practice question below - in the solution why does PV0 change in the denominator (it appears they have just dropped a 9)?
Thanks in advance!
I am having troubles studying about Modified duration and Money duration, and hoping to get some helps.
1. Modified duration can be used to measure the percentage price change upon absolute change in YTM. I am confused about YTM here. Modified duration can be shown as
Modified duration = (dP/P)/d(1+r)
And I think the r here represents periodic interest rate.
Why is it that if the yield curve is flat, the effective duration will be equal to the modified duration for an option-free bond?
Hey! Can you please help me with following question?
We have a YTM for 3 year bond and for 5 year bond of one type and on one yield curve. We can calculate a yield for 3 year bond. However, the yield for 3-year is on the line between 2 and 5.
How to make a 3 year YTM on the curve? With another words, I do not know how to make an adjustment for convexity for 3 YTM. Thank you!
I have a case here and need help in understanding the following:
I notice that most brokers in Bulgaria calculate the YTM of a bond using its dirty price. However, I believe this is incorrect and the clean price should be used. I didn`t find any reference in the CFA curriculum that clarifies this.
Quick discussion of the following question:
The notching adjustment for corporate bonds rated Aa2/AA is most likely:
larger than the notching adjustment for corporate bonds rated B2/B.
the same as the notching adjustment for corporate bonds rated B2/B.
smaller than the notching adjustment for corporate bonds rated B2/B.
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