Dollar Duration use MV or Par value?

CFA Level III
#1

On all of the CFAI questions it says the portfolio consisting of three bonds in equal par value of $1,000,000 each is constructed. The weights are therefore 1/3 even thought he MV of each is different. However, the Schweser eqams seem to weight each bond by MV (par is not even given). Which one is it and will they give both values on the exam and make us choose? Thx

#2

MV

#3

I agree but check out ex 6 vol 3. One year later the MV of each bond has changed yet the dollar duration weight is still 1/3 as in inception.

#4

just remember that portfolio dollar duration is the sum of individual dollar durations (no weighting is needed). for portfolio duration, you will use weighting.

#5

Check the errata on this area. https://www.cfainstitute.org/cfaprog/resources/pdf/Level_III_Errata.pdf

#6

AC123 Wrote: ------------------------------------------------------- > I agree but check out ex 6 vol 3. > > One year later the MV of each bond has changed yet > the dollar duration weight is still 1/3 as in > inception. Geee, to save our time, could you be specific with PAGE NUMBER as well? :slight_smile: This has been discussed before. There should not be weighting with this. Also, there is CFAI errata on this already. - sticky

#7

My bad page 340 vol 3. There’s no weights explicitly but you sum up total DD for each bond and divide by 3 to find the average so in a way you are kind of weighting the DD of the portfolio

#8

AC123, you would do yourself a favor and check errata link posted above, this calculation on p. 340 is wrong and CFAI corrected it

#9

Just checked…got it. CFA needs to space the errata out more…took awhile just to find it:) Thx guys