Equation 15 38 reports the dynamics of the yield with time to maturity T Its volatility is given by () B() , where B() (1 e ) ( ) Plot the volatility with respect to time to maturity Which bonds have higher yield volatility Long term bonds or short term bonds What is the relation between yield vola...

Shortterm bonds have higher yield volatility than longterm bonds see Figure Return volati ...

Equation 15.38 reports the dynamics of the yield with time to maturity T. Its volatility is given

Question:

Equation 15.38 reports the dynamics of the yield with time to T. Its volatility is given by σ(τ) = B(τ)/τ σ, where B(τ) = (1-e-γ* τ)/(γ*). Plot the volatility with respect to time to τ. Which bonds have higher yield volatility? Long-term bonds or short-term bonds? What is the relation between yield volatility and return volatility? Are these the same?
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...