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Dapper425

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tT
发表于 2013-4-10 17:59 | 只看该作者

CFAI text V4 P112: Example 10

why, different, equation, example
How come the answer indicates the new bond market value = dollar duration of old bond / DOLLAR DURATION of new bond * 100? Yet the equation above example 10 (on the same page) indicates the new bond market value = dollar duration of old bond / DURATION of new bond * 100. Can anyone tell the why it’s different?

 

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needhelp1700

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发表于 2013-4-10 18:00 | 只看该作者
thanks, this is very helpful! sometimes the wordings are little bit confusing…

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leadcfa

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发表于 2013-4-10 18:00 | 只看该作者
The fixed-income readings are vague and sometime can be misleading ! I spent very much time but still some questions remained.

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Nishant1

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发表于 2013-4-10 18:00 | 只看该作者
So, to say “dollar duration of 4.5 per bond” is the same as to say “duration of 4.5”?
Sorry to beat to death, but I re-read the passage 3 times & your response and it hasn’t sunk in yet.

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ShooterMcCFA

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5#
发表于 2013-4-10 18:00 | 只看该作者
I am sorry again that I made mistakes again because I am in a hurry.
Please double check if I am right in deriving the formula as follows.
DD(N)pb = D(N) x MV(N)pb x 0.01 = D(N) = DD(N)pb/ [MV(N)pb x 0.01]
= D(N) = [DD(N)pb/ [MV(N)pb] x 100 = [DD(N)pb x 100]/ [MV(N)pb]
= MV(N) = [DD(O) / D(N)] x 100 = [DD(O) x 100] / {[DD(N)pb x 100]/ [MV(N)pb]}
= [DD(O) / DD(N)pb] x MV(N)pb
PV(N)
= MV(N) x [PV(N)pb / MV(N)pb] = {[DD(O) / DD(N)pb] x MV(N)pb} x [PV(N)pb / MV(N)pb]
= [DD(O) / DD(N)pb] x PV(N)pb
In this example DD(O) = 220,000 DD(N)pb=5x90x0.01=4.5 PV(N)pb = 100
= PV(N) = (220.000/4.5) x 100 = 4.899M
PV(N) : Total par value of new bond
PV(N)pb : par value per new bond
It is simplified in the example while actually it is complicated !

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