4.21.2005

Q&A: What's the % price change to...

...a 12%, 12-year bond selling for $125 for +/-75 bp shocks?

A: approximate percentage price change for +75 bps = - duration x change in yield x 100 + convexity adjustment = -5.41

  • From this earlier post, we know the duration is 7.35 and Convexity 17.93.
  • Duration adjustment = - 7.35 * .0075 * 100
  • Convexity adjustment = 17.93* .0075 * .0075 * 100

Do the same for -75bps.

Category: C++ Quant > Debt > Valuation

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