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nira
Topic Author
Posts: 10
Joined: April 11th, 2008, 2:51 am

Modified Duration

March 11th, 2020, 9:48 am

Hi,

Need to calculate modified duration for

forward rate agreements (FRAs), other forward contracts, bond futures, interest rate and cross-currency swaps and forward foreign exchange positions.

I know how to value and price them.

Looking for links to books, papers, formulae with examples to calculate Modified Duration.

Thanks.
 
User avatar
Randor
Posts: 70
Joined: October 8th, 2005, 8:33 am

Re: Modified Duration

March 23rd, 2020, 3:57 pm

duration is dv01/price , where price is the PV of the leg, assuming notional exchange at the end.
to do it for a swap , you calc this dv01 for each leg, calc durartion for each leg , then subtract the 2 durations to get your final number
 
User avatar
nira
Topic Author
Posts: 10
Joined: April 11th, 2008, 2:51 am

Re: Modified Duration

March 23rd, 2020, 5:27 pm

Any guidance on calculating DV01 for swaps ? Fixed to Fixed, Fixed to Floating, Floating to Floating ?
Do i change the fixed and floating rates up and down by 1 bps ? or something else ?
Thanks
 
User avatar
Randor
Posts: 70
Joined: October 8th, 2005, 8:33 am

Re: Modified Duration

March 23rd, 2020, 10:59 pm

Dvo1 is change in price for a 1bp shift in the floating interest rates used to price your trade
 
User avatar
DavidJN
Posts: 1746
Joined: July 14th, 2002, 3:00 am

Re: Modified Duration

March 24th, 2020, 3:23 pm

When tackling the bond futures, make sure you understand the cheapest-to-deliver options.
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