Interview Question: Bond Duration

Sample Question #61 (finance – bond pricing)

What’s a bond’s duration (aka its Macaulay duration)? How do you calculate it? Why is it such an important concept?

(Hint: for the last question, think volatility)

This entry was posted in Sample Qs. Bookmark the permalink.

One Response to Interview Question: Bond Duration

  1. Brett says:

    Duration is a weighted average of term-to-maturity of the bond’s cash flows, where the weights are PV(cash flow in period t) / Price of bond (Fabozzi, Fixed Income Mathematics, ch. 13). The mathematical formula can be found here. Its importance lies its link to the bond price change.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s