Skip to content

Expected change in price based on investor’s views of yield and yield spreads (formula)

January 21, 2018

E(Change in price based on investor’s views of yields and yield spreads) = [-MD * ΔYield]+[½*Convexity*(ΔYield)^2]

MD is the modified duration of a bond

ΔYield is the expected changes to both the yield curve and yield spread

convexity estimates the effect of the non-linearity of the yield curve

Advertisements

From → Asset Valuation

One Comment

Trackbacks & Pingbacks

  1. CFA® Level 3 Exam Post-mortem – Muskblog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: