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BOND MATH: The Theory Behind the Formulas by Donald J. Smith

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Bloomberg Yield Duration and Convexity

Figure 6.2 shows the Bloomberg Yield Analysis (YA) page for the 8 3/8% IBM bond due November 1, 2019. It is priced at 130.725 for settlement on November 10, 2009. This is the corporate bond we saw in Chapter 3, where we worked through the various yield and cash flow calculations. Now let's confirm the (interest rate) sensitivity analysis numbers. This bond has a Macaulay duration statistic of 7.360, a modified duration of 7.198, and a convexity shown to be 0.656. I'll get to Bloomberg Risk, reported at 9.424, in a bit. These risk statistics are annualized and relate the market value, 130.934375 (percent of par value, including accrued interest) to the street convention yield, 4.515%, which is quoted on a ...

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