|Re: 17Bii - Bond Duration|
Message #3 Posted by paolo on 13 Dec 2001, 2:12 p.m.,
in response to message #2 by W. Bruce Maguire II
I guess you are considering a fixed rate bond, so I'll try to explain you how I solved this problem.
First what I suggest to you is to set-up a STAT list named, for example CF (cash flows, in which you'll put the single cash flows for each coupon period (annual, semi-annual, ...). The last cash flow should be the last coupon plus the face value of the bond.
You can then calculate the bond duration by solving the following related equations:
1. bond price
Calculates the bond price for a given yield to maturity or vice-versa.
Calculates the bond duration for the ytm calculated in equation 1
3. price sensitivity
Calculates the price change for a given movement in rates
calculates the convexity of the bond specified above
5. exact price sensitivity
calculates the exact price change, using the convexity adjustment for the bond durtation calculated in equation 3.
If you want I can e-mail the program codes.