Big Chemical Encyclopedia

Chemical substances, components, reactions, process design ...

Articles Figures Tables About

Key rate durations

A portfolio duration of 6.413 means that for a 100 basis point change in the yield for each of the three bonds, the portfolio s market value will change by approximately 6.413%. It is paramount to keep in mind that the yield for each of the three bonds must change by 100 basis points for this duration measure to be useful. This is a critical assumption and its importance cannot be overemphasized. Portfolio managers will find it necessary to be able to measure a portfolio s exposure to a reshaping of the yield curve. We will examine methods for doing later in the chapter when we discuss key rate duration. [Pg.121]

The most popular version of this approach was developed by Thomas Ho in 1992. This approach examines how changes in US Treasury yields at different points on the spot curve affect the value of a bond portfolio. Ho s methodology has three basic steps. The first step is to select several key maturities or key rates of the spot rate curve. Ho s approach focuses on 11 key maturities on the spot rate curve. These rate durations are called key rate durations. The specific maturities on the spot rate curve for which a key rate duration is measured are 3 months, 1 year, 2 years, 3 years, 5 years, 7 years, 10 years, 15 years, 20 years, 25 years, and 30 years. However, in order to illustrate Ho s methodology, we will select only three key rates 1 year, 10 years, and 30 years. [Pg.124]

Thomas S. Y. Ho, Key Rate Durations Measures of Interest Rate Risk, Journal of Fixed Income (September 1992), pp. 29-44. [Pg.124]

The third and final step is to calculate the percentage change in the bond s portfolio value when each key rate and neighboring spot rates are changed. There will be as many key rate durations as there are preselected key rates. Let s illustrate this process by calculating the key rate duration for a coupon bond. Our hypothetical 6% coupon bond has a maturity value of 100 and matures in five years. The bond delivers coupon payments semiannually. Valuation is accomplished by discounting each cash flow using the appropriate spot rate. The bond s current value is 107.32 and the process is illustrated in Exhibit 4.27. The initial hypothetical (and short) spot curve is contained in column (3). The present values of each of the bond s cash flows is presented in the last column. [Pg.125]

To compute the key rate duration of the 5-year bond, we must select some key rates. We assume the key rates are 0.5, 3, and 5 years. To compute the 0.5-year key rate duration, we shift the 0.5-year rate upwards by 20 basis points and adjust the neighboring spot rates between 0.5 and 3 years as described earlier. (The choice of 20 basis points is arbitrary.) Exhibit 4.28 is a graph of the initial spot curve and the spot curve after the 0.5-year key rate and neighboring rates are shifted. The next step is to compute the bond s new value as a result of the shift. This calculation is shown in Exhibit 4.29. The bond s value subsequent to the shift is 107.30. To... [Pg.125]

Substituting in numbers from our illustration presented above, we can compute the 0.5-year key rate duration as follows ... [Pg.128]

Exhibit 4.32 presents a graph of the initial spot curve and the spot curve after the 5-year key rate and neighboring rates are shifted. The bond s postshift value is 106.48 and the calculation appears in Exhibit 4.33. Accordingly, the 5 year key rate duration is computed as follows ... [Pg.130]

What information can be gleaned from these key rate durations Each key rate duration by itself means relatively little. However, the distribution of the bond s key rate durations helps us assess its exposure to yield curve risk. Intuitively, the sum of the key rate durations is approximately equal to a bond s duration. As a result, it is useful to think of a set of key rate durations as a decomposition of duration into sensitivities to various portions of the yield curve. In our illustration, it is not surprising that the lion s share of the yield curve risk exposure of the... [Pg.130]

The reason it is only approximate is because modified duration assumes a flat yield curve whereas key rate duration takes the spot curve as given. [Pg.130]

Key rate durations are most useful when comparing two (or more) bond portfolios that have approximately the same duration. If the spot curve is flat and experiences a parallel shift, these two bond portfolios can be expected to experience approximately the same percentage change in value. However, the performance of the two portfolios will generally not be the same for a nonparallel shift in the spot curve. The key rate duration profile of each portfolio will give the portfolio manager some clues about the relative performance of the two portfolios when the yield curve changes shape and slope. [Pg.131]

Golub, B. W., and L. M. Tilman, Measuring Yield Curve Risk Using Principal Components Analysis, Value at Risk, and Key Rate Durations, Journal of Portfolio Management (Summer 1997), pp. 72-84. RiskMetrics-09/30/96—Spot ZC 3M-30Y 3 92.8/4.8/1.27... [Pg.766]

In batch processing, uncertainty can emerge in operational or market-related parameters. Processing rates, duration of activities, material purchasing and product selling prices are common uncertain variables. Such uncertainty affects the throughput of a plant, the profitability and other key performance indicators (KPIs). In Monte Carlo simulation, numerous scenarios of a model are simulated by repeatedly picking values from a user-defined probability distribution for the uncertain variables. Those values are used in the model to calculate and analyze the outputs in a... [Pg.213]

The production profile for oil or gas is the only source ofrevenueior most projects, and making a production forecast is of key importance for the economic analysis of a proposal (e.g. field development plan, incremental project). Typical shapes of production profile for the main drive mechanisms were discussed in Section 8.2, but this section will provide some guidelines on how to derive the rate of build-up, the magnitude and duration of the plateau, the rate of decline, and the abandonment rate. [Pg.208]

The determinant that mostly influences the QT interval duration is cycle length (RR interval) the longer the RR interval, the longer the QT interval and vice versa. Therefore, a number of formulas (see [94] for a list) are used to normalize the QT interval for heart rate and obtain a corrected QT interval (QTc), a key issue especially... [Pg.62]

Examining the influence of the uncertainties in the key model variables (e.g. ranges of pollutant concentrations, differences in exposure durations, inhalation rates, body weights) that are used to predict high-end exposures of individuals. [Pg.32]

A key feature of the Hereon dispensing system is the ease of regulating the pheromone emission rate from the dispenser. Thus, the emission rate may be adjusted by varying one or more of a variety of parameters (4) 1) thickness of outer layers of the dispensers, 2) pheromone concentration per unit area of the dispenser, 3) size (area) of the dispenser, 4) amount of flake applied per acre, 5) the polymer used to fabricate the dispenser, and/or 6) polymer stiffness. Duration of effectiveness may also be extended by increasing the thickness of the inner layer of the dispenser, in effect increasing the size of the pheromone reservoir of each flake. [Pg.178]

The various influences on the efficacy of UV disinfection are compiled in Fig. 9-1 (cf Malley Jr, 2000). Primarily, the efficacy of UV disinfection depends on the germicidal fluence Ho=EoXt which is the product of fluence rate Eq and the duration time t of the irradiation (often called UV dose , Chapter 2.1) (see Sommer et al., 1998). Other key factors include the hydraulics and hydrodynamics of the UV reactor (Kreft et al., 1986), its geometry (FIGAWA, 1998, Hoyer, 1996), the number and type of UV lamps required (Loge et al., 1996), their temperature profiles with respect to a maximum fluence rate Eq (in the case of LP Hg lamps, cf Fig. 4-8), the water quality and its variability such as UV absorbance/transmittance (Bolton et al., 2001, Sommer et al., 1997), the water matrix, e.g. nitrate concentration, its potential for quartz fouling by inorganic constituents particularly iron ions and hardness (cf Chapter 8-2), the turbidity, the particle content (total sus-... [Pg.282]

Note that the duration of the first polymerization interval, when the rate of activation is far larger than the rate of all bimolecular processes, is usually a few seconds or less [t (2kaktRXo) 1 2]. On the other hand, Equations (5a) and (5b) not only confirm that termination plays a key role in determining the kinetics of the process, but also indicate that the second interval of the reaction is characterized by the equilibrium between activation and deactivation, i.e. R = kaRX/(kdX ). [Pg.122]


See other pages where Key rate durations is mentioned: [Pg.126]    [Pg.126]    [Pg.128]    [Pg.128]    [Pg.130]    [Pg.131]    [Pg.730]    [Pg.126]    [Pg.126]    [Pg.128]    [Pg.128]    [Pg.130]    [Pg.131]    [Pg.730]    [Pg.223]    [Pg.3]    [Pg.136]    [Pg.519]    [Pg.339]    [Pg.130]    [Pg.232]    [Pg.59]    [Pg.247]    [Pg.289]    [Pg.189]    [Pg.659]    [Pg.91]    [Pg.415]    [Pg.14]    [Pg.238]    [Pg.20]    [Pg.188]    [Pg.242]    [Pg.49]    [Pg.64]    [Pg.97]    [Pg.4829]   
See also in sourсe #XX -- [ Pg.121 , Pg.124 , Pg.125 , Pg.126 , Pg.127 , Pg.128 , Pg.129 , Pg.130 ]




SEARCH



Duration

Rate duration

Rate duration durations

© 2024 chempedia.info