Hello friends. I have some confusion in section 3, reading 23.
- I’m trying to understand “this difference arises because of the steepness in the yield curve” viz. Difference between cash flow yield and mkt value weighted avg yield.
1.1 with a steepening yield curve, the long term bond should have been below par and that would have lead to an increase in the mkt weighted yield. It’s the opposite instead. What gives?
- I’m trying to understand " when the yield curve is upwardly sloped, avg duration is less than portfolio duration"
2.1 in calculating portfolio’s Macaulay duration the weights are taken as of each cash flow/total pv of all cash flows. What’s “share of total market value” about it?
2.2 does the difference come from weights or individual durations…