Asset Liability Management

CIR Model Parameter Estimation

2 mins read In this post, we explore CIR Model parameter estimation. In other words, we consider how to calibrate the Cox Ingersoll

Interest Rate Risk: Duration, Macaulay Duration and Modified Duration

2 mins read Duration is a measure of how rapidly the prices of interest sensitive securities change as the rate of interest changes (see application example in the ALM section). For example, if the duration of a security works out to 2 this means that for a 1% increase in interest rates the price of the instrument will decrease by 2%. Similarly, if the interest rates were to decrease by 1% the price of the security would increase by 2%.