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duration of a forward start bond
Posted: December 13th, 2011, 8:28 am
by bonosmate
Do the following 2 bonds have the same duration1st Bond: 4% annual coupon until 20202nd Bond :A 4% bond that pays no coupon for the first 2 yrs but pays a ?higher coupon? thereafter until maturity to compensate for this fact. Both bonds have the same maturity.
duration of a forward start bond
Posted: December 13th, 2011, 9:20 am
by bonosmate
Sorry- I know the answer now!! The bond with the delayed coupon payments would have the longer duration since the average payoff of this bond takes longer than the conventional coupon paying bond.
duration of a forward start bond
Posted: December 13th, 2011, 10:03 am
by daveangel
do the bonds have the same price ?
duration of a forward start bond
Posted: December 13th, 2011, 4:21 pm
by bonosmate
yes daveangel, they would have the same price.
duration of a forward start bond
Posted: December 18th, 2011, 1:48 pm
by wickedwit
so say this forward starting bond starts in 2yrs. Is that added duration equal to something like a zero coupon bond? So that would add around 2yrs of duration? My models don't seem to show that being the case.
duration of a forward start bond
Posted: November 23rd, 2015, 3:19 pm
by harkinsi
Just bumping this chain to see whether there is a response to this question?Essentially two zero coupon bonds that mature in 10yrs from today however, one of the bonds is forward starting by two years. Do they have the same or different duration?