Duration & Dimension
AbstractIn fixed income analysis, duration plays a central role as a proxy for interestrate risk exposure. Althoughthis role relies on the interpretation of duration as (minus) theyield elasticity of the bond price, duration ismeasured as a bond's present value weighted average time to maturity andexpressed in terms of years. Hence duration is regarded as an elasticity with a time dimension. Inthis note we resolve this apparentduration paradox and show that duration is a pure number.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 99-047/2.
Date of creation: 24 Jun 1999
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Web page: http://www.tinbergen.nl
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-07-28 (All new papers)
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