September 2012
Beginner
328 pages
7h 42m
English
Content preview from Key Financial Market Concepts, 2nd Edition
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Duration, Modified Duration, Price Value of a Basis Point (PVB), DV01 and Convexity
Definition
The duration of a bond or other series of cashflows is the weighted average life of the cashflows, using the present value of each cashflow as its weighting.
The modified duration of a bond or other series of cashflows is the proportional change in its price, relative to a change in yield.
The price value of a basis point (PVB), or dollar value of an 01 (DV01), is the price change in an investment arising from a 1-basis-point change in yield.
The convexity of an investment is a measure of the curvature of its price/yield relationship – an indication of the extent to which its value does not change in direct proportion to yield.
How are they used? ...
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