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The average duration of the bonds in the portfolio is often reported. The duration of a portfolio equals the weighted average maturity of all of the cash flows in the portfolio. If each bond has the same yield to maturity, this equals the weighted average of the portfolio's bond's durations, with weights proportional to the bond prices. [1]
Bond duration Bond duration is the weighted-average time to receive the discounted present values of all the cash flows (including both principal and interest), while WAL is the weighted-average time to receive simply the principal payments (not including interest, and not discounting). For an amortizing loan with equal payments, the WAL will ...
While compact, effective duration only measures the effect of a parallel shift in the yield curve across all maturities. It does not take into effect other risk factors, such as non-parallel yield curve shifts, convexity, option-adjusted spreads, and others. However, effective duration may suffice for many managers as a basic risk measure.
With a nice 4.13% yield and an average bond duration of 1.9 years, the VGSH ETF stands out as a "safer" option for retirees to park cash in. It's an incredibly liquid ETF with millions of shares ...
Formally, the duration gap is the difference between the duration - i.e. the average maturity - of assets and liabilities held by a financial entity. [3] A related approach is to see the "duration gap" as the difference in the price sensitivity of interest-yielding assets and the price sensitivity of liabilities (of the organization) to a change in market interest rates (yields).
There have been several signs in the past couple of years that commercial real estate was headed toward a major downfall. Office vacancy rates reached a 30-year high around 18% in 2023. Companies ...