Portfolio duration, Financial Management

We can measure the portfolio duration by calculating the weighted average of the duration of the bonds in the portfolio. The proportion of the portfolio that a security comprises can be considered as weights. Portfolio duration can be represented as:

         w1D1 + w2D2 + w3D3 + .........wKDK

Where,

         wi      =       Market value of bond i/market value of the portfolio.

         Di         =       Duration of bond i.

         K       =       Number of bonds in the portfolio.

Calculating the rupee price change for a given number of basis points for each security in the portfolio and then adding all the price changes can be considered as an alternative procedure for calculating the duration of a portfolio. The portfolio duration can be arrived at by adjusting the percentage price change that is obtained by dividing the total of the price changes by the initial market value of the portfolio.

Posted Date: 9/10/2012 5:20:42 AM | Location : United States







Related Discussions:- Portfolio duration, Assignment Help, Ask Question on Portfolio duration, Get Answer, Expert's Help, Portfolio duration Discussions

Write discussion on Portfolio duration
Your posts are moderated
Related Questions
In a putable bond, the bondholder has the right to force the issuer to pay off the bond prior to the maturity date. Let us consider the previous example with the

which type of approaching to each firm

Q. Graphic Presentation of Organisation of Finance Function? Graphic Presentation of Organisation of Finance Function: - The following chart describes the organization of the f

How do mergers affect communities? A: While a locally controlled bank is merged into a bank headquartered somewhere else (an out-of-market merger), a few apprehension about the i

Examine about Environmental (external) analysis "A study that considers potential environmental effects during planning phase before an investment is made or an operation start

What the term objectives denotes- financial management It must be noted at the outset that term 'objective' is used in the sense of a goal or decision criterion for three decis

Solutions to this Conflict In common, to make sure that managers act to the best interest of shareholders, the firm will: (a) Acquire Agency Costs in the form of:

SWBT Company must decide whether to repair a telephone company computer-based central office switch or purchase a new one. The existing switch originally cost $750,000 and is fully

Describe the major factors contributing to effective cash management in a firm.  Why is the cash management process more difficult in a MNC? An effective cash management system s

Q. Types of financial statement analysis? 1) External analysis This analysis is performed by external stakeholders like lenders, suppliers, investors, and governments. 2)