Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Market price is used for determining the duration of a mortgage-backed security in the coupon curve duration. This approach to calculate the duration of mortgage-backed security was suggested by Douglas Breeden. The coupon curve represents generic pass-through securities of a particular issuer with different coupon rates. Duration is obtained by the coupon curve of prices rolling up and down. The prices obtained from rolling up and down the coupon curve of prices are substituted into the duration formula.
Let us determine the coupon curve duration from the data given below:
Coupon
Price
7%
8%
9%
10%
11%
12%
82.19
88.06
93.38
97.34
101.19
111.23
Let us calculate the coupon curve duration for the 9% coupon pass-through. If the yield declines by 100 basis points, then we assume that the price of the 9% coupon pass-through will also increase to the price of the current 10% coupon pass-through. Similarly, if the yield of the 9% coupon passthrough increases by 100 basis points, the price would decrease to the price of the current 8% coupon pass-through. Therefore, the price would be 97.34 when there is a decline of 100 basis points in the yield while the price would be 88.06 when the yield increases by 100 basis points.
P0 = 93.38
P+ = 88.06
P- = 97.34
Δy = 0.01
The estimated duration is as follows:
Duration = 97.34 - 88.06
2(93.38)(0.01)
= 4.97.
discuss the applicability of an operating cycle considering broilers?
A c quisition Planning and Strategy In the previous section, we discussed about the constraints to successful merger integration. In this section, we will learn how to plan a
The banking sector has a vital and active role in the money market. The transactions taking place in these securities are large in size, both in terms of volumes
Q. What do you mean by Collateralized Mortgage Obligation? Collateralized Mortgage Obligation (CMO) - SECURITY whose cash flows equal the difference between cash flows of colla
Internal business risk associated with the operational efficiency of the firm. The operational efficiency differs from company to company. The efficiency of operation is reflected
Fraud and Society and Analytical Techniques: Fraud and Society - The effects and financial consequences of fraud in society including the individual, older people, financial
Why do businesses spend time, effort, and money to produce forecasts? Explain. Businesses succeed or fail relies on how well organized they are to deal with the situations they
Discuss the option of dividend reinvestment plans
What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract? Answer: A futures or forward c
What are some of the primary advantages when a corporation has operations in countries other than its home country? What are some of the risks? Foreign operations may decrease
The correct estimated duration is:Duration = (97.34 - 88.06) / 2(93.38)(0.01) = 4.332832
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd