This preview shows page 1. Sign up to view the full content.
Unformatted text preview: • duration = effective maturity • the percentage price changes of a bond with high duration are greater than the percentage price changes of a bond with low duration • 1-percent-bond has a higher duration than 10-percent-bond →since the 10% have a higher weight than a lot of money coming in, in the end Matching liabilities with assets • hedge inteerst-rate risk by matching liabilities with assets • immunize (i.e. make immune to interest-rate risk) duration of assets * market value of assets = duration of liabilities * market value of liabilities • used by pension funds, actuaries and leasing...
View Full Document
This note was uploaded on 11/16/2009 for the course F 3033 taught by Professor Hh during the Spring '09 term at Maastricht.
- Spring '09