Duration & Dimension
1999-06-11
Research Paper
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In fixed income analysis, duration plays a central role as a proxy for interest rate risk exposure. Although this role relies on the interpretation of duration as (minus) the yield elasticity of the bond price, duration is measured as a bond's present value weighted average time to maturity and expressed in terms of years. Hence duration is regarded as an elasticity with a time dimension. In this note we resolve this apparent duration paradox and show that duration is a pure number.
Automatically Extracted Terms
- duration
- value
- maturity
- cash flows
- interest
- number
- y / m
- period
- elasticity
- bond price
- price
- dimension
- fabozzi
- coupon
- cash flow dates
- bond price variability
- respect
- index
- formula
- fisher
