Equation 15.38 reports the dynamics of the yield with time to maturity T. Its volatility is given by () = B()/ , where B() =

Equation 15.38 reports the dynamics of the yield with time to maturity 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 maturity 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?