Interest rate forecasting anticipating movements

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Unformatted text preview: ity are higher when the coupon rate is lower. 3. With the coupon rate held constant, a bond's duration and interest rate sensitivity generally increase with time to maturity. Duration always increases with maturity for bonds selling at par or at a premium to par. 4. With other factors held constant, the durationa and interest rate sensitivity of a coupon bond are higher when the bonds yield to maturity is lower. 5. Duration of perpetuity = 1+ Y / Y Convexity - because of the convex shape of the bond price curve - the curvature reflects the fact that progressive increases in the interest rate result In progressively smaller reductions in the bond price. Passive Bond Management • Immunization - a strategy to shield net worth from interest ra...
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This note was uploaded on 04/09/2014 for the course FMIS 3644 taught by Professor Chang during the Spring '14 term at University of Minnesota Duluth.

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