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Fixed Income Mathematics
book

Fixed Income Mathematics

by Robert Zipf
June 2003
Beginner content levelBeginner
366 pages
9h 16m
English
Academic Press
Content preview from Fixed Income Mathematics
Equation 17.8
NEGATIVE DURATION
When we developed duration as a time measure, we didn’t consider the pos-
sibility of negative duration. However, we can now look at that concept. Under
what conditions could modified duration be negative?
If modified duration is negative, then dP/dY must be positive. The slope of
the yield/price curve must be positive. That means that increasing yield must
increase price. Under what conditions could that happen?
If the bond has a call feature that is, or soon will be, in effect and is selling
at a yield close to the coupon rate, then a decrease in yield will not increase
price. The bond is already selling as high as it can ...
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Publisher Resources

ISBN: 9780127817217