in a leveraged portfolio, you have Da*A = Dl*L + De *E
but i think in calculating your position in equity you deduct short position duration? Is there a summary of when is the liability duration added and when it is deducted?
Thanks
in a leveraged portfolio, you have Da*A = Dl*L + De *E
but i think in calculating your position in equity you deduct short position duration? Is there a summary of when is the liability duration added and when it is deducted?
Thanks
Do it like this …
Duration of Portfolio = (Duration of Assets x Assets) - (Duration of Liabilities x Liabilities) / Equity
Equity = Assets - Liabilities
Liabilities = Amount borrowed (amount of leverage)