Session 4     Bond Price Volatility and Managing Interest Rate Risk

(Monday, November 8) 

Preparatory Reading:            

CP-4, Fabozzi, Chapter 4 (pp. 55-68 and 77-78) and Chapter 19 (pp.453-465)

  On TUCKNT1:public:coursefiles:fall:t05:cm, CM Immunization101.xls

·        The Price-Yield Relationship

·        Duration of a Bond

·        Macaulay vs. Modified Duration

·        Convexity of a Bond

·        The Concept of Immunization

·        Immunizing a Bond Portfolio

·        Why Duration is only a partial immunization solution

Homework Problems