Calculate the alternative duration measure explained in Section 31.2 for a two-year bond with a principal of

Question:

Calculate the alternative duration measure explained in Section 31.2 for a two-year bond with a principal of $100 paying coupons semiannually at the rate of $3 per year when Vasicek's model is used with a=0.13, b=0.012, σ = 0.01, and r=1%. Show that it correctly predicts the effect of an increase in r to 1.05%.
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: