Question: Explain the key short - run and long - run influences on changes in the ( 1 0 year ) yield to maturity ( YTM

Explain the key short

-

run and long

-

run influences on changes in the

(10

year

)

yield to maturity

(

YTM

)

and hence on the price of a coupon paying T

-

bond or corporate bond. Explain how we measure the duration of a bond and how duration and convexity are used to determine the change in the value of a portfolio of bonds. Explain why duration increases with maturity of the bond.

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