Using Duration and Convexity in the Analysis of Callable Bonds

• Published in: Financial analysts journal Vol. 44; no. 3; pp. 53 - 72
• Main Authors: Dunetz, Mark L., Mahoney, James M.
• Format: Journal Article
• Language: English
• Published: Charlottesville Routledge 01.05.1988; The Financial Analysts Federation; National Federation of Financial Analysts Societies; Taylor & Francis Ltd
• Subjects: Bonds; Callable securities; Cash flow; Convexity; Financial bonds; Financial instruments; Financial portfolios; Financial securities; Implications; Market value; Mathematical analysis; Measures; Noncallable securities; Securities analysis; Yield; Yield curves; Yield to maturity

The market value of any cash flow stream, including bonds or bond portfolios, can be approximated by the sum of its cash flows, discounted at a given internal rate of return, or yield. In comparing cash flows, however, or in creating an asset-liability match, one must consider not only the market va...