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BOND MATH: The Theory Behind the Formulas by Donald J. Smith

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Chapter 6: Duration and Convexity

The 20-year versus 30-year deep discount bond curiosity is the second example that I use in “Two Common Textbook Misstatements about Bond Prices and Yields,” presented at the annual meeting of the Financial Education Association in Orlando, September 2003. I first wrote about that phenomenon in a paper titled “The Duration of a Bond as a Price Elasticity and a Fulcrum,” published in Journal of Financial Education (Fall 1988).

Frederick R. Macaulay's classic book is Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States Since 1856 (National Bureau of Economic Research, 1938).

The general formulas for yield duration and convexity, equations 6.13 ...

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