debt_market

May 19th, 2015
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Abilene Christian University
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the prices of all the option free bonds move in the opposite direction from the change in yield required, the percentage price change is not the same for all bonds. For very small changes in the yield required, the percentage price change for a given bonf is roughly the same, whether the yield required increases or decreases

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ConvexitySession 81Convexity & Factors affecting Interest RateAnalysis of Bond Price Volatility2Bond Price VolatilityPrice Yield Relationship for SixHypothetical Bonds 9% coupon bond with 5 years to maturity 9% coupon bond with 25 years to maturity 6% coupon bond with 5 years to maturity 6% coupon bond with 25 years to maturity 0% coupon bond with 5 years to maturity 0% coupon bond with 25 years to maturity3Bond Price VolatilityReqyield9%/5 yr9%/ 25 6%/5 yr 6%/ 25yryr0%/5yr0%/ 25yr6%112.79138.5910010074.422.87%108.3123.4595.8488.2770.8917.908%104.05110.791.8878.5167.5514.079%10010088.1370.3564.3911.079.01% 99.9699.9088.0970.2864.3611.04410%96.13990.8784.5563.4861.398.711%92.4683.0681.1557.658.546.812%88.9576.35Bond Price Volatility477.9152.7155.835.52Percentage Price ChangeReqyieldChangein BasisPoint9%/5yr9%/ 25yr6%/5 yr 6%/ 25yr0%/5yr0%/ 25yr6%-30012.8038.5913.4742.1315.56106.047%-2008.3223.468.7525.4610.0961.738%-1004.0610.744.2611.604.9127.109.01% 1-0.04-0.10-0.04-0.11-0.05-0.2410%100-3.86-9.13-4.06-9.76-4.66-21.2311%200-7.54-16.93-7.91-18.03-9.08-37.8912%300-11.04-23.64-11.59-25.08-13.28-50.965Bond Price VolatilityPrice Volatility Characteristics ofOption- Free

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