SERVING THE QUANTITATIVE FINANCE COMMUNITY

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by fa
August 8th, 2009, 10:02 pm
Forum: The Quantitative Finance FAQs Project
Topic: What is convexity?
Replies: 34
Views: 278749

What is convexity?

<t>No response, apart from bilbo1408’s posts. Perhaps the notation is bad (I should learn Latex), or the explanations unclear. The intention was to stimulate comment since the analysis in my previous posts shows that convexity is redundant in at least one respect. Furthermore, I believe the analysis...
by fa
October 20th, 2007, 3:50 pm
Forum: The Quantitative Finance FAQs Project
Topic: What is convexity?
Replies: 34
Views: 278749

What is convexity?

<t>bilbo1408Good question. I don’t know. Two comments.First, I suspect my approach gives the same result as summing all the terms of the Taylor series.Secondly, I’ll tell you a little about how I came to the result. It had been on my mind for some years that the zeros of the TVM polynomial had to ha...
by fa
July 15th, 2007, 8:46 pm
Forum: The Quantitative Finance FAQs Project
Topic: What is convexity?
Replies: 34
Views: 278749

What is convexity?

<t>drdSorry about the delayed reply -- been busy. I’m not sure which of the previous posts you regard as nonsense, some of them or all of them? But I don’t think my main point about convexity is nonsense. Here’s another attempt to explain it. The bond pricing equation is merely a special case of the...
by fa
May 1st, 2005, 4:54 pm
Forum: The Quantitative Finance FAQs Project
Topic: What is convexity?
Replies: 34
Views: 278749

What is convexity?

<t>Further thoughtsThought one – On realityObjections can be raised about the use of complex rates of interest. Not real. Don’t exist. But there appears to be no other way of calculating an accurate yield sensitivity that does not require convexity and the other terms of a Taylor series expansion. I...
by fa
April 22nd, 2005, 8:54 am
Forum: The Quantitative Finance FAQs Project
Topic: What is convexity?
Replies: 34
Views: 278749

What is convexity?

<r>CorrectionI slipped up in my previous posting. The third paragraph is not true. The slope coefficient dB/dY is a component of the formula for modified duration: D=(dB/dY)(1/B). It is the slope coefficient of tD (true duration) that lies between the slope coefficients of the modified durations D a...
by fa
March 31st, 2005, 7:09 pm
Forum: The Quantitative Finance FAQs Project
Topic: What is convexity?
Replies: 34
Views: 278749

What is convexity?

<t>There is another way of looking at convexity.Assume a vanilla bond with known price B, coupon C, and number of periods N. If the equation is solved for the YTM, (1+Y), there are actually N solutions, an entire constellation, call it S. Under normal circumstances, only one (real) value of S is cal...
by fa
March 31st, 2005, 6:25 pm
Forum: Student Forum
Topic: Bond Example
Replies: 7
Views: 154962

Bond Example

<r>Player, May I ask if your work is an extension of the papers below?Michael J. Osborne, On the computation of a formula for the duration of a bond that yields precise results, The Quarterly Review of Economics and Finance, Volume 45, Issue 1, February 2005, Pages 161-183Osborne, Michael J., A Simp...
by fa
October 19th, 2004, 7:01 am
Forum: Student Forum
Topic: Why do bonds have +ve convexity? -- Are they SOLELY as result of interest rate risk premium?
Replies: 4
Views: 171413

Why do bonds have +ve convexity? -- Are they SOLELY as result of interest rate risk premium?

<r>The following paper may answer your question: <URL url="http://ssrn.com/abstract=366700">http://ssrn.com/abstract=366700</URL>. It is about to appear in the Quarterly Review of Economics and Finance (Feb 2005). Convexity depends upon the (n-1) interest rates (other than the orthodox rate) that so...
by fa
July 4th, 2004, 8:44 am
Forum: Student Forum
Topic: taking advantage of irr function
Replies: 1
Views: 184416

taking advantage of irr function

<t>Been thinking about your question. Here is an approximate method that makes use of the IRR function. Assume (1+a*r)=(1+r)^m then ln(1+a*r)=m*ln(1+r) and a*r~m*r therefore a~m. Example. Assume nper=4 and a=0.1 as you suggest.k=1/((1+r)^(1+m))+1/((1+r)^(2+m))+1/((1+r)^(3+m))+1/((1+r)^(4+m))m is a f...
by fa
December 10th, 2003, 11:23 am
Forum: Student Forum
Topic: Is Complex Analysis of much use in FE?
Replies: 11
Views: 189864

Is Complex Analysis of much use in FE?

<r>The many solutions for the interest rate in the time value of money equation can be of some use.Try <URL url="http://www.mfa-2004.com/papers/mo0973522589.pdfI">http://www.mfa-2004.com/papers/mo0973522589.pdfI</URL> suspect there is more to discover than this. The ideas in the paper lead to the an...
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