Bond duration (introduction)

Using a simple zero-coupon bond, I illustrate bond duration. We have a few variations, including weighted average time to cash flow, but the best way to view duration is as a SENSITIVITY: the % change in bond price given a % change in yield (YTM).

Category:

Education

Tags:

• Finance
• Excel
• Quant

[ivqancorp]

Good video David. Is Cab an ex-g/f perhaps?

[bionicturtledotcom]

@ivqancorp thanks, appreciated. Cab seems way more pleasant than my ex-g/f ;)

[Cab828]

hey dumb ass. zero coupon bonds are, by default, semi annual.

[bionicturtledotcom]

@Cab828 compound frequency is beside the point. Convexity is a simpler calculation under continuous. As modified and Mac convexity converge under continuous, for illustration purposes you get a convexity that is invariant to yield. But thanks for your, er, help and constructive tone

[TheGrayIntellectual]

Thanks for this video.

[wiertmir]

What actualy is your "Actual" value?

The video shows formula:

=face*EXP(-(C5+1)*T)-face*EXP(­-C5*T)

Which I understand as: (Price for 104% yield) - (Price for 4% yield), not as the price percentage change.

Also "Modified Duration" = "Macaulay Duration" / (1 + yield)

which should give positive 28.85. Why do you need this to be negative?

[vatd112]

@kaqhan2 Did you just get released from a mental institution?

[kaqhan2]

@Cab828 I am laughing at your dumbass comment now. You must be new to this shit hahaha!

[MogTrader]

do you have a book on higher level bond analycitcs?