Question: Answer the below questions. (a) What factors affect the modified duration of an interest-rate option? (b) Deep-in-the-money option always provides a higher modified duration for

Answer the below questions.
(a) What factors affect the modified duration of an interest-rate option?
(b) Deep-in-the-money option always provides a higher modified duration for an option than a deep-out-of-the-money option. Comment.
(c) The modified duration of all options is positive. Is this statement correct?

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a The modified duration of an interestrate option is influenced by the modified duration of the underlying bond delta the price responsiveness of the ... View full answer

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