Duration

CFA Level III
#1

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!

#2

Quarterly Reset has AVG duration of 0.125

#3

1/4ly reset 0+.25/2=.125

#4

I should clarify that is for the Floating Side.

#5

Sorry, why 0.25/2 for quarterly reset?

#6

Its Average.

#7

Thanks!

#8

it’s weird because in the schweser programm they don’t average the floating side

#9

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

#10

(0+0.25)/2 = .125