Fixed income instrument

chandniwadhwani92
Finance Junkie
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Fixed income instrument

Postby chandniwadhwani92 » Tue Oct 07, 2014 5:54 pm

Wat does this means???????
Money duration of per 100 of bonds par value

edupristine
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Fixed income instrument

Postby edupristine » Fri Oct 10, 2014 5:47 am

Modified (or effective) duration measures the percentage price change for a 1% change in the yield to maturity (YTM)

Dollar (or money) duration measures the dollar (or other currency) price change for a 1% change in YTM

So, if you have a $1,000,000 portfolio with a modified duration of 5 years and YTM increases 0.1%, then its dollar duration (money duration) is $1,000,000 × 5 years = 5,000,000 (dollar-years), its (approximate) percentage price change is -5 × 0.1% = -0.5%, and its (approximate) dollar change is -$5,000,000 × 0.1% = -$5,000.

chandniwadhwani92
Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

Fixed income instrument

Postby chandniwadhwani92 » Fri Oct 10, 2014 8:37 am

what does basically per 100 of par value means over here

edupristine
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Joined: Wed Apr 09, 2014 6:28 am

Postby edupristine » Fri Oct 10, 2014 12:08 pm

When you encounter terms like "per 100 of par value", you simply need to multiply dollar duration by 100 to get the money duration for entire par value of bonds.
If you need more clarification, please give me the question where you have encountered this statement.


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