Bond Duration and Convexity Explained (Derivatives Foundations - Lesson 12)

Описание: Link to spreadsheet:
https://docs.google.com/spreadsheets/...

Welcome to lesson 12 of our Derivatives Foundations course! Building upon our previous discussion on Yield-to-Maturity, we dive into the crucial concepts of Bond Duration and Convexity – essential tools for understanding and managing interest rate risk in fixed income investments. First, we'll demystify Macaulay Duration using a clear, step-by-step numerical example to illustrate the weighted average time to a bond's cash flows. Then, we'll explore Modified Duration and how it provides a practical estimate of the impact of interest rate changes on bond prices. Finally, we'll uncover the advantages of positive Bond Convexity and explain why this second-order effect is particularly beneficial for bondholders, offering protection against yield fluctuations. Whether you're a student just starting out or a seasoned finance professional, this lesson provides valuable insights. Don't forget to check out the attached Google Sheets file containing all the calculations for this lesson!

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Link to Playlist with all lessons in the course:
   • Derivatives Foundations: Forwards, Futures...  

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