Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Market price is used for determining the duration of a mortgage-backed security in the coupon curve duration. This approach to calculate the duration of mortgage-backed security was suggested by Douglas Breeden. The coupon curve represents generic pass-through securities of a particular issuer with different coupon rates. Duration is obtained by the coupon curve of prices rolling up and down. The prices obtained from rolling up and down the coupon curve of prices are substituted into the duration formula.
Let us determine the coupon curve duration from the data given below:
Coupon
Price
7%
8%
9%
10%
11%
12%
82.19
88.06
93.38
97.34
101.19
111.23
Let us calculate the coupon curve duration for the 9% coupon pass-through. If the yield declines by 100 basis points, then we assume that the price of the 9% coupon pass-through will also increase to the price of the current 10% coupon pass-through. Similarly, if the yield of the 9% coupon passthrough increases by 100 basis points, the price would decrease to the price of the current 8% coupon pass-through. Therefore, the price would be 97.34 when there is a decline of 100 basis points in the yield while the price would be 88.06 when the yield increases by 100 basis points.
P0 = 93.38
P+ = 88.06
P- = 97.34
Δy = 0.01
The estimated duration is as follows:
Duration = 97.34 - 88.06
2(93.38)(0.01)
= 4.97.
Short-term funds having a maturity of 15 days and over are categorized as term money. Banks access this term money route to bring greater stability in their short
Operating Budget It is a collection or set of formal financial documents that details expected expenses and revenues, as like all other expected operating and financial transac
what is the cost of capital and advantages of it?
Explain the Baumol Model
The Financial Services Authority in the United Kingdom: The Financial Services Authority (FSA) in the United Kingdom (UK) is the financial watchdog. It is a company limited by
Foreign Exchange Market Equilibrium: We say that the foreign exchange market is in equilibrium when deposits of all currencies oer the same expected rate of return (when retu
Question: On a pilot basis a Government Department, PPO, is preparing its financial statements using accrual basis. The following information is provided: The following bala
The usual number of passengers using the service is dependent upon the demand at each particular exchange rate. At 1·52 Euro/£ expected demand = (0·33·)(500 + 460 + 420) = 460
Define and discuss indirect world systematic risk. The indirect world systematic risk can be illustrated as the covariance among a nontradable asset and the world market portfo
What is a financial ratio? A financial ratio is a number that denotes the value of one financial variable that is relative to another. Put much more simply, a financial ratio
The correct estimated duration is:Duration = (97.34 - 88.06) / 2(93.38)(0.01) = 4.332832
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd