You have a bond priced at 100 per 100 par value with AnnModDur = 4.335 and PVBP (price value per basis point) = 0.044. What is the money duration per 100 of par implied by these figures?
Explanation
Money duration equals the product of annualized modified duration and full price; PVBP equals MoneyDur times 0.0001 (1 bp).
Other questions
Which statement best describes bond convexity for an option-free fixed-rate bond?
You compute PV+ = 99.771 and PV− = 100.230 for a bond with PV0 = 100 when yield is changed by DeltaYield = 0.0005 (5 bps). Using these results, approximate the annualized modified duration.
Given PV+ = 99.771, PV− = 100.230, PV0 = 100, and DeltaYield = 0.0005, approximate the bond's annualized convexity.
A bond has AnnModDur = 4.58676 and AnnConvexity = 24.23895. Using these metrics, what is the estimated percentage price change for a 100 bps increase in yield (ΔYield = +0.01)?
For the same bond in Question 4, what would be the estimated percentage price change for a 100 bps decrease in yield (ΔYield = −0.01)?
Money convexity (MoneyCon) for a position equals:
An investor holds a USD100,000,000 position with AnnModDur = 4.43092 and AnnConvexity = 24.23895. If yield increases by 100 bps, what is the money convexity adjustment to the estimated change in position value (i.e., the second-order currency term)?
Why does convexity improve duration-based price-change estimates, especially for large yield changes?
Two option-free bonds A and B have identical modified durations. Bond A has greater dispersion of cash flows (payments more spread out) than Bond B. Which bond likely has the greater convexity?
A bond’s PVBP (price value per basis point) is 0.044 per 100 par. How much would the price change in currency terms for a 50 bp increase in yield for a USD30,000,000 par position (assume linearity)?
Which bond features increase convexity (all else equal)?
You estimate a portfolio weighted-average AnnModDur of 6.169 and AnnConvexity of 52.921. For a 50 bp increase in yield, compute the portfolio estimated percent price change including convexity.
Which method is theoretically correct to compute portfolio duration and convexity but is seldom used in practice?
A bond priced at PV0 = 107.429 has PV+ = 106.561 and PV− = 108.307 for a ΔYield = 0.0005. Using the approximation formula, what is the bond's annualized convexity (ApproxCon)?
Which of the following is TRUE about money duration and money convexity?
A bond's ApproxModDur computed using PV+ and PV− with ΔYield = 5 bps equals 4.587. If you double ΔYield to 10 bps and recompute the approximation (still small), what is the most likely effect on the estimated ApproxModDur?
Two bonds have the same modified duration. Bond X has much higher annualized convexity than Bond Y. Which of the following is true?
Which of the following statements about the sign of the convexity adjustment term 0.5 * AnnConvexity * (ΔYield)^2 is correct for option-free bonds?
A five-year bond priced at par has AnnModDur = 4.574 and AnnConvexity = 25. If the yield increases by 200 bps, which effect dominates the percentage price change estimate?
You approximate AnnModDur and AnnConvexity using PV+ and PV− computed at ±5 bps. Which of the following is TRUE about these approximations?
A portfolio has two bonds: Bond A (weight 0.4) with AnnModDur 3 and AnnConvexity 10, and Bond B (weight 0.6) with AnnModDur 10 and AnnConvexity 150. What is the portfolio AnnConvexity by the weighted-average method?
Which limitation applies to using weighted-average duration and convexity for portfolios?
A manager expects a non-parallel yield curve movement (steepening). Which portfolio risk measure gives more detailed insight than overall duration?
For an option-free bond, which of these bonds is most likely to have the largest annualized convexity?
You have bond prices PV+ = 99.255, PV− = 99.269 and PV0 = 99.262 (ΔYield = 1 bp or 0.0001). What is the approximate AnnModDur?
An investor holds a bond position with MoneyDur = USD437,054 and MoneyCon = USD4,085,034,000. If yields rise by 100 bps, what is the approximate estimated loss using both money duration and money convexity?
If two bonds have identical AnnModDur but different AnnConvexity, what does that imply about expected performance when yields change moderately?
Which of the following statements about convexity and price asymmetry is correct for option-free bonds?
A bond with a very high positive convexity is most attractive to investors when:
Which calculation method for convexity involves summing (time)*(time+1)*(weight)*(1+periodic YTM)^(−periods per year) across cash flows?
In the approximation method for convexity, why do we divide by (ΔYield)^2 * PV0?
A long-maturity bond has higher convexity than a short-maturity bond. Which risk management implication follows?
Which scenario increases the usefulness of convexity in price-change estimation?
If a bond's PV− (price when yield decreases) is higher than PV0 and PV+ (price when yield increases), what does the numerator PV− + PV+ − 2*PV0 represent in convexity approximation?
How does money convexity affect the currency estimate of price changes for a position?
Which statement best describes how to use convexity when estimating bond returns for a specified holding period that is short?
If bond A has AnnConvexity = 24 and bond B has AnnConvexity = 389 (much larger), both with similar durations, which bond is more sensitive to large yield changes?
Which is the correct expression for Price Value per Basis Point (PVBP) using PV+ and PV− computed for ±1 bp?
When converting a reported convexity value of 0.235 to use in the standard convexity formula where yields are in decimals (e.g., 0.01), what is the appropriate scaled convexity to use?
A portfolio manager expects yields to fall 150 bps. Portfolio weighted AnnModDur = 9.87415 and AnnConvexity = 161.62749. Which action is consistent with expecting a gain from falling yields?
Which of these is NOT a reason convexity is more important for long-dated bonds?
Which of the following best explains why portfolio weighted-average convexity might misestimate portfolio price change under a non-parallel yield curve move?
If two portfolio constructions have the same duration but one has higher convexity, which is true when yields are volatile?
Which of the following is NOT true about effective convexity vs annualized yield convexity for option-containing bonds?
Which formula approximates the change in currency value of a bond position including convexity?
If an investor uses the weighted-average convexity approach for a portfolio, which condition improves the accuracy of the approximation?
A bond's exact price change for a given yield move is evaluated using the model PRICE in Excel. Why might the duration+convexity approximation still be used?
You calculate portfolio AnnModDur by summing weighted AnnModDur_i. Under which market move is this portfolio AnnModDur most reliable for estimating percent changes?
Finally, which sequence of steps correctly estimates the convexity-adjusted percentage price change for a portfolio given a small parallel shift ΔYield?