Hi,dear allIf I buy a Inverse floating Note.How to calculate FRN daration??FRN info : Maturity date from now may be 10 year. Coupon rate is (5% - 6M Libor). Quaterly pay.I know that floating Note duration is roughly next payment period.So floating rate note duration is 0.25 year.If there is fixed rate note 10 year period , 5% rate, it's duration equal to 8.5 year Could I use above info to calculate FRN duration??which one is correct FRN duaration i. 8.5 -0.25 = 8.25 (fixed - floating) ii. 0.25 - 8.5 = -8.25 (floating - fixed) iii. the other answer?thanks for your kindlt help.

I think that depends on what duration you refers to. If it's dollar duration (dPdy) then the answer should be 8.25. However if you're talking about Macaulay duration (dollar duration divided by dirty price) the result can be away from 8.25, as the "scaling" by dirty price can be quite different between a fix coupon bond and a floater. Similar for modified duration (Macaulay duration divided by (1+y/freq)). In any case the duration should be positive.

thank you.~