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Short Rate Dollar Duration SR $ Dur = -(K u -K d )/(r u -r d ), where K u =Asset up payoff, r u

Short Rate Dollar Duration

SR$Dur = -(Ku-Kd)/(ru-rd), where

Ku =Asset up payoff, ru=6.004%

Kd=Asset down payoff, rd=4.721%

What are the SR dollar durations and SR durations of the following assets?

1) the noncallable bond

2) the call

3) the callable bond


image

Time 0 Time 0.5 Time 1 99.32 0.970857 99.44 NC bond 0.973047 100.4 0.976941 100.03 100.69 100.60

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