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Duration and Immunization

In: Lecture Notes in Fixed Income Fundamentals

Author

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  • Eliezer Z Prisman

Abstract

This lecture is dedicated to the study of the sensitivity of the price of bonds and portfolios of bonds to the changes in the interest rates. A measure of the sensitivity of bond prices to changes in interest rates, called Duration, was first suggested by Macaulay in 1938. The field of fixed income securities has evolved tremendously since that time and the academic literature now criticizes this measure. As we proceed with the development and understanding of this measure we will also gain an insight into this critique.

Suggested Citation

  • Eliezer Z Prisman, 2017. "Duration and Immunization," World Scientific Book Chapters, in: Lecture Notes in Fixed Income Fundamentals, chapter 4, pages 119-169, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813149779_0004
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    More about this item

    Keywords

    Fixed Income; Bond Markets; Term Structure of Interest Rates; Forwards; Bond Arbitrage;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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