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Gmike2000
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Posts: 801
Joined: September 25th, 2003, 9:49 pm

OA Duration in Lehman Point .... and in general

January 12th, 2004, 7:20 pm

Could someone please help me clarify...have not been able to find any help on the web or even from our Lehman rep.The OA Duration they publish for their bonds on POINT tends to be a bit longer than their ISMA Mod Dur. Why is that?Now, we all know that ISMA Mod Dur is crap and OA Dur is the one to be used. However, I am a person who needs to see the guts of every number before I trust it...So: Assume a non-callable corporate bond. Its OA Dur is longer than its Mod Dur. Why?Is this because OA Dur models do true, i.e. empirical, shifts of the yield curve, by which they reprice the bond for, say, a 50bps or 100bps move in rates?So in that case, the difference between (theoretical) ISMA Mod Dur and (empirical) OA Dur would be that the latter includes the convexity effect of shifting the curve a full 50 or 100 bps. Is that the reason for OA durs being longer, or am I getting it completely wrong?Again...I am talking about non-callable bonds here. All literature I could find only talks about OA Dur in the context of callable/putable bonds.Thanks!
Last edited by Gmike2000 on January 11th, 2004, 11:00 pm, edited 1 time in total.
 
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leephill
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Joined: January 16th, 2004, 8:29 am

OA Duration in Lehman Point .... and in general

January 16th, 2004, 8:31 am

Please contact the London Index Group at Lehman Brothers on londonindexgroup@lehman.com and we can answer your question.
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