July 2011
Beginner
288 pages
7h 22m
English
Content preview from BOND MATH: The Theory Behind the FormulasBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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Conclusion
Duration and, to a lesser extent, convexity are core topics in the study of bond math, right up there with price and yield calculations and conversions, and yield curve analysis. These statistics are fundamentally mathematical and are derived using algebra and calculus. Duration is sometimes just a building block for more developed models of risk. For example, value-at-risk (VaR) analysis includes the effect of varying volatilities and correlations for points along the yield curve. While VaR commonly is used for risk measurement in financial institutions and is subject to its own limitations and misapplications, it goes “beyond duration” in terms of mathematics and statistics. But to get there, you need a solid foundation in classic ...
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