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 banks circumtances to impose compensating balances, What are compen...

What are compensating balances and why do banks require them from some customers?  Under what circumstances would banks be most likely to impose compensating balances? Compensa

Define pro forma financial statements and cash budget, What is the differen...

What is the difference among pro forma financial statements and a cash budget?  Explain why pro forma financial statements are not employed to forecast cash needs. Pro forma inco

Examine about the risk-based auditing, Examine about the Risk-based auditin...

Examine about the Risk-based auditing A risk based audit will be reviewing the risk management process and considering main risks of the organisation as a whole. Risk manage

Special bond structures, Special bond structures are the municipal se...

Special bond structures are the municipal securities bearing special security structures. They are of two types - insured bonds and pre-refunded bonds.

Bond Valuation, The Pennington Corporation issued a new series of bonds on ...

The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31,

Different types of cash flow to bondholder of coupon bonds, What are the di...

What are the different types of cash flow to the bondholder of coupon bonds? Coupon bonds deliver two different kinds of cash flow to the bondholder are as follows: a. Face

Forecasting yield volatility, There are several methods available to ...

There are several methods available to forecast yield volatility. But before that, let us look into the calculation of forecasted standard deviation. Assume th

What can financial institution do for deficit economic unit, What can a fin...

What can a financial institution Frequently do for a deficit economic unit (DEU) that it would have difficulty doing for itself if the DEU were to deal directly along with an SEU?

Seed financing, It's a small amount of money which is used for initial mark...

It's a small amount of money which is used for initial market research or product development for a new venture.

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