讲座固定收益风险管理过去问题duration and convexityl3持续时间凸度.pdfVIP

Lecture3:FixedIncomeRiskManagement

Pastpaperquestions:

1.Definedurationofabondanddiscussitsusage.07/08

2.Defineconvexityandexplainhowmodifieddurationandconvexityareusedto

approximatebonds’percentagechangeinprice,givenachangeininterestrate.07/08

3.Explainthedurationisabettermeasurethanmaturitywhencalculatingbondssensitivity

tochangesininterestrate.Discussthelimitationofduration.09/10

4.‘Wheninterestratesarelow,therewillbelittledifferencweenMacaulaydurationand

Modifiedduration’.Discuss.09/10

–DiscusstherelationshipbetweenBondPricingandInterestRates

–ExplainDuration,determinationofDuration

–CalculateModifieddurationMacaulay’sduration.Discussthelimitationsof

Duration

–DemonstratehowtoapproximateDurationandConvexity

–Use40minutestoworkexamplesonlecture1-3

Lecture3:FixedIncomeRiskManagement

1.Interestrate

•Bondpricesandyieldsareinverselyrelated:asyieldsincrease,bondpricefall;viceversa

•Sincethepriceofabondfluctuateswithmarketinterestrates,theriskthataninvestor

facesisthatthepriceofabondheldinaportfoliowilldeclineifmarketinterestrises.The

riskisreferredtoasinterestraterisksandisamajorriskfacedbyinvestorsinthebond

market.

2.Bondpricingrelationships

•Inverserelationshipbetweenpriceandyield.

•Convex:Thepercentageincreaseinpricewhenyieldsdeclineisgreaterthanthe

percentagedecreasewhenyieldsrise.Thisisduetotheconvexrelationship,whenplotted

onagraph,betweenpriceandyield.

•Sensitivity:Priceoflong-termbondstendtomoresensitivetointerestrat