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willsucceed

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tT
发表于 2011-7-11 15:21 | 只看该作者

Fixed vs. Floating Duration

higher, having
Why does having Fixed cash flows have a higher duration than Floating ?
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former

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2#
发表于 2011-7-11 15:21 | 只看该作者
Floating duration is based upon the tenor of the floating leg..eg 3 m libor duration is 0.25

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nannan66

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3#
发表于 2011-7-11 15:22 | 只看该作者
because floating rates reset often, thus they have a shorter duration

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bpdulog

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4#
发表于 2011-7-11 15:22 | 只看该作者
There is some kind of flaw in this argument , that I can't pinpoint.

Are rates going to zero after the swap reset . Won't the floating rate reset to some reasonable rate after the reset? The calculation pretends that the floater has no obligation after the reset.

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bboo

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5#
发表于 2011-7-11 15:22 | 只看该作者
Duration measures the linear interest rate sensitivity of interest rate sensitive instruments. For floating rate instruments, as you are not locked in fixed interest rate, your interest rate risk is limited only to next coupon reset date, so is duration.

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mik82

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6#
发表于 2011-7-11 15:22 | 只看该作者
Thanks. I love CFA.

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thommo77

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7#
发表于 2011-7-11 15:22 | 只看该作者
cfalover Wrote:
-------------------------------------------------------
> So which has a higher duration....Pay
> fixed/receive floating or....Receive Fixed/pay
> floating?


u tell me mr lover lover ..............in the first ur short duration .........you gave away the larger duration to receive the smaller duration..................


vice versa for the second

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