Duration of a Bond option

CFA Level III
#1

Can someone explain the duration of bond option?

I just don’t seem to get it.

Thanks!

#2

My guess would be that it’s:

%Δoption price / %ΔYTM of the underlying bond

Where, exactly, did you see it?

#3

Fixed Income Portfolio Management - study session 10

#4

Duration of option = Delta of option × Duration of underlying instrument × (Price of option)/(Price of underlying)

#5

Sounds like what I wrote, only more explicit.

#6

How do you get = “Delta of option × Duration of underlying instrument × (Price of option)/(Price of underlying)” from Magician formula above.

I know the curriculum shows this formula and I understand the Magician formula above, but I cant reconcile the two intuitively.

Could someone please help!

#7

it’s very comforting to me seeing magician writes " my guess". The vulnerability of the CFA Master gave me more confidence.

20% of the value of AF comes from magician’s contributions. I hope you do well in your upcoming endeavor. Maybe you’ll be S600magician by then. You deserve the Merc instead of the Honda. Unless the Honda carries emotional value.