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!
Rate duration can be defined as the sensitivity of the change in value to a particular change in spot rate. Every point in a spot rate curve has a rate duration. Therefore, instead of one rate duration, we will have a vector of durations representing each maturity on the spot rate curve. If all rates change by the same number of basis points then the total change in value would give us the duration of a security or portfolio to a parallel shift in rates.
Donald Chamber and Willard Carleton suggested this approach for the first time in 1988. They called it "Duration Vectors". After that, Robert Reitano came with "partial Durations," which is similar to the duration vectors approach. In 1992, Thomas Ho came up with a new version of this approach which gained much popularity. This approach concentrates on 11 key maturities of spot rate curve. These rate durations are called key rate durations. Key rate duration is measured for 3 month, 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, 15-year, 20-year, 25-year, and 30-year maturities on the spot rate curve. The changes between any two rates are calculated using a linear approximation.
We can measure the impact of any type of yield curve by using key rate durations. A level shift can be measured by changing all key rates by same basis points. The impact of steepening of the yield curve can be found by decreasing the key rates at the short end of the yield curve and determining the positive changes in the portfolio value using the corresponding key rate durations and increasing the key rates at the long end of the yield curve, and determining the negative changes in the portfolio value using the corresponding key rate durations.
Discuss and compare hedging transaction exposure by using the forward contract vs. money market instruments. While do the alternative hedging approaches generate similar result?
Having seen the measure used for analyzing the convertible bonds, let us now examine the merits and demerits of convertible bonds, and why or wh
In all previous illustrations, we assumed that coupon payments are paid on annual basis. However, most of the bonds carry interest payment semi-annually. Semi-ann
Question : (a) Lucky Corporation is considering an investment in one of the two mutually exclusive proposals: Project A which involves an initial outlay of Rs 170,000 and Proj
Incremental Cost The measured change in a firm's cost of production due to an additional activity pursued by the firm. Incremental costs can be measured by the cost difference
Memorandum Memo to: Blackwater plc Main Board. Subject: Proposed Pollution Control Project. From: Lower down the hierarchy. Date: That'll be the day. On purely non-
What are the social and contemporary issues in financial management?
Q. What are Sources of Finance? No details are specified concerning the nature of a business to comment on and hence only general recommendations can be made. Given that fixed
What is a sunk cost? Is it relevant while evaluating a proposed capital budgeting project? Explain. A sunk cost is a cash flow which has previously occurred, or that will take
Securitization refers to conversion of illiquid assets to liquid assets by converting longer duration cash flows into shorter duration ones. Securitization denote
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: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd