Effective duration for callable bonds
A method of callable bonds pricing based on a binomial process is derived and the behaviour of this price when the yield curve changes is studied. The conclusion is that the effective duration corresponding to this pricing method may be a misguided characteristic, because the value of a callable bond need not be a smooth function of the change of the yield curve.
Volume (Year): 7 (2000)
Issue (Month): 11 ()
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