Could anyone explain how put option decreases duration when interest rate increases? I have looked at other threads which discusses same issue but it doesn’t provide any explanation.
What happens to the value of a put option (on a bond) when interest rates increase?
Put option becomes more valuable .
If the price increases when interest rates increase, does it have positive (effective) duration or negative (effective) duration?
So . . . if you add a security with a negative duration to an existing portfolio (with a positive duration), what will it do to the portfolio’s duration?
Decrease. Thank you