Portfolio duration, Financial Management

Assignment Help:

We can measure the portfolio duration by calculating the weighted average of the duration of the bonds in the portfolio. The proportion of the portfolio that a security comprises can be considered as weights. Portfolio duration can be represented as:

         w1D1 + w2D2 + w3D3 + .........wKDK

Where,

         wi      =       Market value of bond i/market value of the portfolio.

         Di         =       Duration of bond i.

         K       =       Number of bonds in the portfolio.

Calculating the rupee price change for a given number of basis points for each security in the portfolio and then adding all the price changes can be considered as an alternative procedure for calculating the duration of a portfolio. The portfolio duration can be arrived at by adjusting the percentage price change that is obtained by dividing the total of the price changes by the initial market value of the portfolio.


Related Discussions:- Portfolio duration

Explain the relationship between growth and inequality, While poverty reduc...

While poverty reduction has become the main goal of development efforts, there is an on-going and sometimes heated debate about the elements that would be at the center of any sens

Genesis Energy Capital Plan Report, Calculate the firm’s WACC. Prepare and ...

Calculate the firm’s WACC. Prepare and analyze each planned capital expenditure. Evaluate, rank, and recommend the capital expenditures according to beneficial value to the organiz

Purchasing and discounting of bills, Purchasing and discounting of bills is...

Purchasing and discounting of bills is the most important, from in which a bank lends without any collateral security. Present day commerce is build upon credit. The seller draws a

Determine the purchasing in leaminger plc, b) Each $1 of outlay prior to 3...

b) Each $1 of outlay prior to 31 December 2003 would mean a loss in NPV on the alternative project of $0·20. There is so an opportunity cost of using funds in 2002. Purchasing

Method to find seasonal variation in time series, Method to Identify the Co...

Method to Identify the Component of Seasonal Variation in a Time Series This technique is called as Ratio to Moving Average Method. In this technique, we construct an index wh

Define why it is hard to maintain a fixed exchange rate, Once capital marke...

Once capital markets are integrated, it is hard for a country to maintain a fixed exchange rate. Explain why this may be so. Answer: one time capital markets are integrated int

Definition of financial management, DEFINITION OF FINANCIAL MANAGEMENT ...

DEFINITION OF FINANCIAL MANAGEMENT Financial Management is a stream concerned with the generation and allotment of scarce resources (generally funds) to the most proficient use

Functions of derivatives market, Functions of Derivatives Market: To re...

Functions of Derivatives Market: To reduce risk or eliminate risks some ways and methods are there. Risk in the capital market can be reduced by diversification or putting eggs

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd