Duration and Convexity Calculations, Yield Curve Applications
Free SOA Exam FM (Financial Mathematics) lesson in General Cash Flows, Portfolios, and Asset-Liability Management. 23 min read, ~3,451 words.
Portfolio duration/convexity = PV-weighted averages, never simple averages. First-order Macaulay approximation is multiplicative:. A different number than the additive. Additive equivalence: equals because. Perpetuity durations: level immediate, from; the due version is one year shorter. Forward rate:. Numerator exponent is always one more. Yield curve shapes: normal (up), inverted (down)...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Example 5
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 5b
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