Рет қаралды 8,741
Effective duration approximates modified duration. Both express interest rate sensitivity: an effective (or modified) duration of 6.2 years tells us to expect a 0.620% price change if the yield changes by 10 basis points; i.e., 0.10% ∆y * 6.2 years = 0.620% ∆P. Effective duration is given by -1/P * [P(+∆y) - P(-∆y)]/(2*∆y) where ∆y is our selected, small yield shock. This video explain the intuition which is that we use effective duration when it's more realistic to retrieve to slope of a secant line, as an approximation to the exact slope of the nearby tangent line. Effective duration is appropriate when the price/yield relationship is non-trivial (e.g., embedded options cause negative convexity) and therefore doesn't lend itself to an easier, analytical modified duration. Discuss this video here in our FRM forum: trtl.bz/2YMGSs9
Subscribe here www.youtube.co...
to be notified of future tutorials on expert finance and data science, including the Financial Risk Manager (FRM), the Chartered Financial Analyst (CFA), and R Programming!
If you have questions or want to discuss this video further, please visit our support forum (which has over 50,000 members) located at bionicturtle.co...
You can also register as a member of our site (for free!) at www.bionicturt...
Our email contact is support@bionicturtle.com (I can also be personally reached at davidh@bionicturtle.com)
For other videos in our Financial Risk Manager (FRM) series, visit these playlists:
Texas Instruments BA II+ Calculator
• Texas Instruments BA I...
Risk Foundations (FRM Topic 1)
• Risk Foundations (FRM ...
Quantitative Analysis (FRM Topic 2)
• Quantitative Analysis ...
Financial Markets and Products: Intro to Derivatives (FRM Topic 3, Hull Ch 1-7)
• Financial Markets and ...
Financial Markets and Products: Option Trading Strategies (FRM Topic 3, Hull Ch 10-12)
• Financial Markets and ...
FM&P: Intro to Derivatives: Exotic options (FRM Topic 3)
• FM&P: Intro to Derivat...
Valuation and RIsk Models (FRM Topic 4)
• Valuation and RIsk Mod...
Coming Soon ....
Market Risk (FRM Topic 5)
Credit Risk (FRM Topic 6)
Operational Risk (FRM Topic 7)
Investment Risk (FRM Topic 8)
Current Issues (FRM Topic 9)
For videos in our Chartered Financial Analyst (CFA) series, visit these playlists:
Chartered Financial Analyst (CFA) Level 1 Volume 1
• Level 1 Chartered Fina...
#bionicturtle #risk #financialriskmanager #FRM #finance #expertfinance
Our videos carefully comply with U.S. copyright law which we take seriously. Any third-party images used in this video honor their specific license agreements. We occasionally purchase images with our account under a royalty-free license at 123rf.com (see www.123rf.com/... and we also use free and purchased images from our account at canva.com (see about.canva.co.... In particular, the new thumbnails are generated in canva.com. Please contact support@bionicturtle.com or davidh@bionicturtle.com if you have any questions, issues or concerns.