金融风险duration model（ppt 38）资料文档.pptVIP

2.4 Duration model Introduction Calculating duration Interpreting duration Understanding more features of duration Using duration for interest rate risk immunization Limitations of duration immunization Introduction First developed in 1938 by Frederick Macaulay Taking into account both leverage and timing of cash flow of assets and liabilities More accuracy in interest rate measurement Better for interest rate risk immunization Regulatory requirement Reflection on the Shortcoming of Maturity model: Ignoring coupon effect Maturity model tries to take advantage of the maturity effect on bond value and use its maturity as an indicator of its interest rate sensitivity. But strictly speaking, it is a good case only when the bond generates no coupon, i.e., it is a zero coupon bond. Coupon effect is ignored in maturity model. More bonds pay coupons, and coupon effect must be taken into account. Shortcoming of Maturity model: Ignoring coupon effect Bonds with identical maturities but different coupon payments responds differently to interest rate changes. Coupon effect does exist. With higher coupons, more of the bond’s value is generated by cash flows which take place sooner in time. Consequently, less sensitive to changes in R. So, maturity can not serve well as an accurate measure of interest rate sensitivity of coupon bonds. Maturity effect vs. Coupon effect on bond value (Interest Rate Sensitivity of 6% Coupon Bond) Maturity effect vs. Coupon effect on bond value(Interest Rate Sensitivity of 8% Coupon Bond) Remarks on Preceding Slides The longer maturity bonds experience greater price changes in response to any change in the discount rate. (Maturity effect) The range of prices is greater when the coupon is lower. (Coupon effect) The 6% bond shows greater changes in price in response to a 2% change than the 8% bond. The first bond is has greater interest rate risk. Exploring the ambiguity of maturity What does maturity of a bond exactly mean in a coupon bon