Bond duration

Good Student
Posts: 22
Joined: Thu Apr 17, 2014 9:40 pm

Bond duration

Postby devinarastogi84 » Fri May 23, 2014 5:31 am

what will be the formula for modified duration for 0 coupon bond?

MD*= D/ (1+YTM) or MD*= D/(1+(YTM/2))

In a previous coming paper solution, for 0 coupon bond the formula used is D/(1+(YTM/2)). why its YTM/2 when bond is 0 couponed.

It should be for semi annual coupon bond . Please tell me in what case YTM in modified duration will be YTM/2.

Finance Junkie
Posts: 704
Joined: Wed Apr 09, 2014 6:28 am

Bond duration

Postby edupristine » Sat May 24, 2014 8:01 am

The formula for modified duration is:
Modified duration = Duration/(1+YTM/2).
Since zero coupon bond are discount bonds, and discount bonds are semi-annual bonds. Hence, the formulas used is for semi-annual bonds.

Return to “FRM Part I”



Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.