CFA curriculum Vol 5 P270 Question 2.B Duration for the fixed rate bond of a swap is 0.75. Total duration for 4 year quarterly payment bond is: 0.75x4 – 0.125=2.875 My question: how to get the 0.125? Thanks!
Quarterly Reset has AVG duration of 0.125
1/4ly reset 0+.25/2=.125
I should clarify that is for the Floating Side.
Sorry, why 0.25/2 for quarterly reset?
it’s weird because in the schweser programm they don’t average the floating side
Semin Annual Float at beginning = 0.5 Duration, at end = 0 duration, hence 0+0.5 / 2 = 0.25 average duration for Semi Annula 0.125 average duration for quarterly
(0+0.25)/2 = .125