Duration doubt

Book-4, Fiex Income, Page-151, Q-13 - I have no idea what they are taking here.

how can a overnight repo increase portfolio duration than a 2 year repo ?!?

Help, please?

i believe this was asked before, not sure what the answer was, try to search for it

D of Equity = (DA-DL)/Equity

As DL increases, obviously your DE decreases.

2 year repo has higher D than over night, DE using 2 year will be less

Got it, Thanks!

i just got this equation in my head, does anyone remember where its from

DE = (Duration Assets * Assets) - (Duration Liabilties * (Liabilities / Assets))

sorry to confuse anyone.

fixed income book page 109

I thought it was

DE = [(Duration Assets * Assets) - (Duration Liabilties * Liabilities)] / Equity

oh oh…i know what you mean now…

LADG it is called I think. And I think it is for bank IPS, all the way back in book 2 institutional investor

Also the formula for leveraged return which is Rp = Ri + [B/E) \* (Ri-c)] Can also be used to calculate leveraged duration. Just use Duration of assets in place of Ri and duration of borrowed funds in place of c. You get the same answer.

haha yes, just went back and looked at my notes. i actually had to formula wrong

the correct formula is LADG = Duration of Assets - Duration Liabilities * (Liabilities/Assets)

just for clarification, Assets should be Total Investable Amount(equity + borrowed) and Liabilities should be Borrowed funds, correct?

^ yes.

For simplicity of remembering this formula, I remember it as

Dollar Duration of my Equity = Dollar duration of Assets - Dollar Duration of Liabilities

DurationEquity*Equity = DurationAssets*Assets-DurationLiabilities*Liabilities

Pretty straightforward to remember- accounting equation.

So once I get Dollar duration of Equity I know I just need to divide by equity to get duration of equity.


Method above keeps me from messing it up.

Also remember the term duration of equity is used interchangeably with duration of leveraged portfolio…Both uses the same formula…