Example 6 in Reading 24 has
value = $100,000,000
duration = 19.72
They say money duration = 197,200
But the formula for money duration I have is
Money duration = Duration * Market Value / 100
= 19.72 * 100,000,000/100 = 19,720,000
What am i missing?
They seem to have calculated PVBP, but are calling it money duration.
1BP
Hi,
Just checked out the example. Quite confused about it too now.
I think they might be referring per $1,000,000 (they are calculating PVBP per $1,000,000).
It doesn’t make any sense that a $100,000,000 portfolio with a 19.72 duration would have $duration of 197,200.
It would be great if someone could shed some light on the issue.
This reading has all sorts of problems. Wouldn’t be surprised if this was a mistake.
You did not multiple by 1BP. Oh and Money duration and PVBP are the same with the only difference that Money duration terminology is used for portfolio and PVBP for individual bonds.