Ay Y- Yo Y+ Convexity is the measurement of price curvature of a bond in the...
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Ay Y- Yo Y+ Convexity is the measurement of "price curvature" of a bond "in the neighborhood" of the bond's current market rate and price point: Convexity where Ay = 0.50% Y- = YO - Ay YO current market rate of bond Y+ = YO + Ay C/Y 2 Thus the measurement is based on "neighborhood" bond prices of V- and V+ which corresponds to change in neighborhood yields -- YO ± 0.5% -- i.e. Y- and Y+ from its current bond market rate YO. Convex Funds, a bond investment mpany, underwrote a set of bonds with the following characteristics: MktRate 3.00% Maturity (yrs) 30 fill in these ... → correspondind to V- = price of bond @ Y- corresponding to VO = current price of bond price of bond @ Y+ corresponding to V+ = calculate these bond prices PS: leave them in positive numbers ... V_ +V+ - 2V 2V (Ay)² CouponRate 3.00% Using the above formula and data, calculate this bond's Convexity by calculating and filling in the template: V- Vo V+ Face 1,000 feature noncallable Convexity = Use above formula to calculate in space below: = 253.5303 Ay Y- Yo Y+ Convexity is the measurement of "price curvature" of a bond "in the neighborhood" of the bond's current market rate and price point: Convexity where Ay = 0.50% Y- = YO - Ay YO current market rate of bond Y+ = YO + Ay C/Y 2 Thus the measurement is based on "neighborhood" bond prices of V- and V+ which corresponds to change in neighborhood yields -- YO ± 0.5% -- i.e. Y- and Y+ from its current bond market rate YO. Convex Funds, a bond investment mpany, underwrote a set of bonds with the following characteristics: MktRate 3.00% Maturity (yrs) 30 fill in these ... → correspondind to V- = price of bond @ Y- corresponding to VO = current price of bond price of bond @ Y+ corresponding to V+ = calculate these bond prices PS: leave them in positive numbers ... V_ +V+ - 2V 2V (Ay)² CouponRate 3.00% Using the above formula and data, calculate this bond's Convexity by calculating and filling in the template: V- Vo V+ Face 1,000 feature noncallable Convexity = Use above formula to calculate in space below: = 253.5303
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Face value Coupon period Market rate V VO V 1000 3 12 1000 15 30 2 60 ... View the full answer
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
Posted Date:
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