Excel duration between coupon dates How does EXCEL calculate DURATION for settlement dates between coupon dates? This was a question posed by one of our readers recently. We have already examined the calculation of Excel Duration and Price functions when settlement dates equal coupon payments dates in
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
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.
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 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
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 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
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