Interview Question: Family of Durations

Sample Question #156 (finance – bond pricing)

Explain each of the following concepts and their differences. How do you calculate them?

  1. Duration
  2. Macaulay duration
  3. Modified duration
  4. Effective duration

(Comment: detailed bond pricing questions like this are actually not common at non-fixed income interviews, although if your resume says you know fixed income, you can expect questions like this)

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

One Response to Interview Question: Family of Durations

  1. Brett says:

    1. Generic term referring to a measure of bond’s price sensitivity to interest rate change.
    2. Original definition.
    3. Adapted from Macaulay duration for cases when interest rate is quoted on an annualized basis
    4. Used when the bond has a built-in option, such as callable bonds

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