The price value of a basis point will be the same regardless if the yield is increased or decreased by 1 basis point. However, the price value of 100 basis points (i.e., the change in price for a 100-basis-point change in interest rates) will not be the same if the yield is increased or decreased by 100 basis points. Why?
Answer to relevant QuestionsConsider the following two Treasury securities: Which bond will have the greater dollar price volatility for a 25-basis-point change in interest rates? What is meant by the spread duration for a floating-rate bond? (a) How is the short-end duration of a portfolio computed? (b) How is the long-end duration of a portfolio computed? (c) How is the short end and long end of a portfolio defined? (d) Suppose that the SEDUR of a portfolio is ...The November 26, 1990, issue of BondWeek includes an article, “Van Kampen Merritt Shortens.” The article begins as follows: “Peter Hegel, first V.P. at Van Kampen Merritt Investment Advisory, is shortening his $3 ...When all Treasury issues are used to construct the theoretical spot rate curve, what methodology is used to construct the curve?
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