CFAI says a portfolio’s dollar duration is equal to the sum of the dollar durations of the component securities. Stalla says a portfolio’s dollar duration is the weighted average of the dollar durations of the component securities where the weights are calculated using market values. Which one is correct? I’m confused!
Hmm… It seems that we discussed this before and there was an error in the CFAI curriculum. But here it seems the CFAI curriculum is right and Stalla is wrong. Could you have switched Stalla and CFAI? Your first definition is correct (i.e., it is a “sum” not a “weighted avaerage”).
I checked the CFAI Errrata. CFAI says its the sum. Stalla has no errata for this. I guess I should stick with what CFAI says then! Thanks 
Schewser has the same formula as Stalla. If you go back to the definition of dollar duration, it makes sense that you have to find the dollar change in each component of the portfolio for a 1% change in int. rates and add them together to get the dollar change in the portfolio value.
Yes. I believe dollar duration is the sum and duration is the weighted average.
Hi mo34 and AnalyseThis, Where in CFAI text does it say “sum”? I find weighted average though, in p.340, CFAI #3. Having said that, I think it should be “sum”. But CFAI seems to be wrong (in my sense) with p.340, example 6 on the same page, and Q4 on p.362 as well. Please, tell me it should be “sum”!! - sticky mo34 Wrote: ------------------------------------------------------- > Schewser has the same formula as Stalla. If you go > back to the definition of dollar duration, it > makes sense that you have to find the dollar > change in each component of the portfolio for a 1% > change in int. rates and add them together to get > the dollar change in the portfolio value.
Its sum - i believe schweser’s issued an errata. this came up in a thread earlier - don’t have the link - sorry.
It is sum. CFAI also issued on errata on this.
I think…Portfolio dollar duration= total value of the protfolio * weighted avg duration *0.01
dollar duration of individual security = security value * security duration * 0.01 ($d1 = v1 * d1 * 0.01) portfolio dollar duration = sum of dollar durations of individual securities ($D = $d1 + $d2 + … + $dn) portfolio duration = weighted average of individual securities durations (D = w1*d1 + w2*d2 + … + wn*dn)