|
PureBytes Links
Trading Reference Links
|
Chuck:
>From "Security Analysis and Portfolio Management" (Fourth Edition) by
Fischer and Jordon:
"All other things being equal, with the same percentage change in
yield, the volatility of the price of a bond increases
1. As the maturity lengthens (the longer the maturity, the greater
the bond price volatility), but at a diminishing rate as maturity is
lengthened
2. As the coupon rate declines (the lower the coupon, the greater
the price volatility)
3. As the yields rise (the higher the yield level from which a yield
fluctuation starts, the greater the price volatility)."
As an example, if interest rates rise from 7% to 8%, the price of a 20-year,
8% coupon bond will decrease from roughly 110 to 100 -- a 9.1% price
decrease. On the other hand, the price of a 6% coupon bond will decrease
from roughly 89 to 80 -- a 10.1% price decrease.
Increased price volatility.
Glen
----- Original Message -----
From: <CRLeBeau@xxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: November 23, 1999 10:12
Subject: 6% data in Bonds
> The CBT says that the 6% bonds should trade just like the 8% bonds only 20
> big points lower. That seems a bit simplistic but I hope it is that
> simple. Do any of our Bond traders on the list have any comments?
>
> Chuck
|