# Tag Archives: Convexity

## Bond Duration Convexity calculations for US Treasuries

Convexity & Duration calculator for US Treasury Bills, Notes and Bonds. To demonstrate how Duration and Convexity are calculated for specific US Treasuries we select instruments from recent US Treasury bill, note and bond auctions. Please note that we are determining these metrics (Convexity &

## Limits: Trading Limits – Duration, Convexity and PVBP Limits

Other Limits Duration Limits Duration measures the sensitivity of the price of the product/ value of the portfolio to changes in the interest rate. In order to limit the sensitivity the company needs to decide what the acceptable level of duration for the product/ portfolio

## Finance Training Course – Course Outline – Introduction to Derivative Products

An introductory course aimed at banking, corporate, treasury and sales teams that reviews intermediate and advance derivative products with afocus on marketing and sales applications. Participants work with product, sales, pricing and risk concepts applicable to derivative markets.

## Bond Convexity and Sensitivity for Fixed Income securities

Bond Convexity calculation example A working example of bond convexity and sensitivity calculation. Earlier we had reviewed the calculation process for Effective Duration. In this post we will see how bond convexity is calculated. We will also see how the Effective Duration and Convexity are

## Duration Convexity Calculation Example: Working with Effective Duration

A working example of effective duration calculation. Earlier we had reviewed the calculation process for Macaulay and Modified Duration. In this post we will focus on the steps for calculating Effective Duration. Effective Duration Effective Duration is calculated using the following formula: Where, Delta_i= change in

## Macaulay Duration Excel calculation example

Macaulay Duration Excel Calculation Example A working example of  Macaulay & Modified duration calculation. Earlier we had considered the importance of the Duration risk metric to Asset Liability Management (ALM) and managing interest rate risk. In this post we will look at the specific mechanics of

## Interest Rate Risk: Convexity

Impact of convexity. A normal shaped price-yield curve, such as the one given below, suggests that a bond’s price may not increase by the same absolute amount when interest rates fall by a certain % as when prices decrease due to an interest rate rise

## Interest Rate Risk: Duration, Macaulay Duration and Modified Duration

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%.

## Duration Convexity Asset Liability Management

Duration Convexity and Asset Liability Management What is the relationship between Duration, Convexity and Asset Liability management.  Let’s take a quick look Duration Duration is defined as interest rate sensitivity. For the purpose of this post modified duration is calculated by estimating the price change per

## CPE-Forecasting the Monetary Policy decisions – will there be a rate cut or not

Forecasting the monetary policy The next monetary policy announcement is due in the last week of May 2010. We attempt to forecast the cut in the policy discount rate by looking at oil prices, the relationship between oil prices and imports, exports, remittances, the current