This short video demonstrates the relationship between the bond price and yield. If the price goes up, the yield comes down, and vice verse. The video analysis why it happens?
The yield to maturity (YTM) of a bond is the rate of return earned by an investor if he holds the bond till maturity. It is the overall return earned by the investor who purchases the bond at the market price and holds it till maturity. It is the internal rate of return of the
In this post, we will demonstrate how you can calculate the price and the yield of a bond using a zero curve. Assume that it is a 3-year bond that pays a coupon of 6% and has a $100 par value. We also have the 3-year zero curve as shown below: The cash flows for
It is a passive strategy, which tries to follows the weight age of index on a day to day basis. It is usually taken up with the idea of not underperforming the index, without actively handling the same aggressively. This is a follow-up strategy, with the least risk of underperforming the index. A pure bond
There are various kinds of bonds strategies which a person could adopt to get returns out of the bonds he would like to hold in the portfolio. These include: Pure Bond Indexing Strategy Enhanced Indexing by Matching Primary Risk Factors Enhanced Indexing by Small Risk Factors Mismatching Active management by Large Risk Factor Mismatches Full-blown
Modified duration indicates the percentage change in the price of a bond for a given change in yield. It is a more adjusted measure of Macaulay duration that produces a more accurate estimate of bond price sensitivity.
Now that we understand what duration is, and how it is calculated, let’s take a look at some of the important properties of duration.
This video takes a simple example and demonstrates how the duration of the bond is calculated using excel.
This video provides an introduction to the bond concept and the steps involved in calculating it.
The duration of a fixed income instrument is a weighted average of the times that payments (cash flows) are made. The weighting coefficients are the present value of the individual cash flows.