-Whot should have an understanding of duration, modified duration and convexity. - Who should be able...

-Whot should have an understanding of duration, modified duration and convexity.
- Who should be able to calculate duration and should understand how to construct an immunized portfolio.
- Who understand active bond portfolio management, from the concept of interest-rate predictions, and exploit mispriced bonds.

Solutions

Expert Solution

Duration of Bond - DOB(Duration of bond) is a measureance of a bond price sensitivity which shows changing in interest rate are known as Duration of bond. If a bond duration is 10 years then its interest rate rises to 10% or its reflect as 100 basis point or vice versa.

Modified Duration - Modified duration of bond is the bond which shows changes in securitues with change in interest rate are known as Modified duration.

Convexity of bond - Convexity of bonds are define as a non-linear relationship of bond price which are changes with changes in interest rate are known as convexity of bond.

Duration of bond is the measure of risk because it have a direct relationship of price volatility and the company able to calculate duration of bond for securing its holder.

Immunization Portfolio - Immunization protfolio is the portfolio which is used to measure the risk and impact of risk on net worth. Immunization is used to minimising the impact of interest rate on net worth and these are contruct as its better way for making portfolio.

Understanding of active bond portfolio management is easy that active bond portfolio stand for the portfolio which gives a regular interest and makes more profit is known as active bond portfolio management.

jeff jeffy answered 1 year ago

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