Title :
Duration Based on Term Structure Using Exponential Splines
Author_Institution :
Sch. of Stat., Anhui Univ. of Finance & Econ., Bengbu
Abstract :
The duration of a bond measures its price sensitivity to a change in its yield. It can thus be used to evaluate the risk exposure of the portfolio with respect to a change of the term structure, and it is useful for how to regulate the risk. The paper addresses the simple duration measure, which supposes that the term-structure curve is "flat" and shifts in the term-structure curve are parallel. Then, the paper introduces term structure of interest rate model using exponential splines and applies it to the calculation of the duration. Then the paper presents empirical applications in China, and the empirical results indicate that the duration based on term structure using exponential splines is more rigorous than the simple duration, and the simple duration underestimate the interest rate risk In the end, the paper provides a summary of the paper, and contains some concluding remarks.
Keywords :
economic indicators; pricing; splines (mathematics); bond measures; exponential splines; interest rate model; price sensitivity; risk exposure evaluation; term structure; Bonding; Economic indicators; Finance; Fluid flow measurement; Helium; Portfolios; Reactive power; Risk management; Security; Statistics;
Conference_Titel :
Wireless Communications, Networking and Mobile Computing, 2008. WiCOM '08. 4th International Conference on
Conference_Location :
Dalian
Print_ISBN :
978-1-4244-2107-7
Electronic_ISBN :
978-1-4244-2108-4
DOI :
10.1109/WiCom.2008.2058