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Duration and convexity in spanish corporate bonds

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  • Francisco Sotos

Abstract

The aim of this paper is to investigate risky-prices sensitivity to interest rate changes in the Spanish market and to see if sensitivity is lower than public debt. To contrast this hypothesis, this paper presents a model that analyzes the risky-prices sensitivity to interest rate changes through effective duration and convexity. The most relevant contribution of the paper is to obtain a better specification to the duration expression that contribute to the marginal increment of the coefficient of determination and the construction of a conditional volatility model that overcomes the linearity models of constant variance. Copyright International Atlantic Economic Society 2004

Suggested Citation

  • Francisco Sotos, 2004. "Duration and convexity in spanish corporate bonds," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 10(4), pages 273-277, November.
    • Handle: RePEc:kap:iaecre:v:10:y:2004:i:4:p:273-277:10.1007/bf02295140
    DOI: 10.1007/BF02295140
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    References listed on IDEAS

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    1. Longstaff, Francis A & Schwartz, Eduardo S, 1995. "A Simple Approach to Valuing Risky Fixed and Floating Rate Debt," Journal of Finance, American Finance Association, vol. 50(3), pages 789-819, July.
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    3. Duffee, Gregory R, 1999. "Estimating the Price of Default Risk," The Review of Financial Studies, Society for Financial Studies, vol. 12(1), pages 197-226.
    4. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
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