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In this case the BPV or DV01 (dollar value of an 01 or dollar duration) is the more natural measure. The BPV in the table is the dollar change in price for $100 notional for 100bp change in yields. The BPV will make sense for the interest rate swap (for which modified duration is not defined) as well as the three bonds.
The modified Dietz method [1] [2] [3] is a measure of the ex post (i.e. historical) performance of an investment portfolio in the presence of external flows. (External flows are movements of value such as transfers of cash, securities or other instruments in or out of the portfolio, with no equal simultaneous movement of value in the opposite direction, and which are not income from the ...
The time-weighted return (TWR) [1] [2] is a method of calculating investment return, where returns over sub-periods are compounded together, with each sub-period weighted according to its duration. The time-weighted method differs from other methods of calculating investment return, in the particular way it compensates for external flows.
Julia’s Dollar-Weighted Return: 15% ($1,000 total investment over time / $1,166 overall investment value by the end of the period) Julia has the same time-weighted value as Richard does.
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 ...
Duration is a measure of the price sensitivity of a stock to changes in the long term interest rate, i.e., the longer the duration, the more sensitive the stock is to interest rates. In U.S. stock markets, an SEC rule adoption in 1982 (rule 10b-18) that allowed discretionary stock buybacks has distorted the calculation of duration based on ...
If the return in 2015 was 10% in Singapore dollars, and the Singapore dollar rose by 5% against the US dollar over 2015, then so long as there were no flows in 2015, the return over 2015 in US dollars is: 1.1 x 1.05 − 1 = 15.5%. The return between the beginning of 2015 and the end of January 2016 in US dollars is: 1.155 x 1.07 − 1 = 23.585%
Time value of money dictates that time affects the value of cash flows. For example, a lender may offer 99 cents for the promise of receiving $1.00 a month from now, but the promise to receive that same dollar 20 years in the future would be worth much less today to that same person (lender), even if the payback in both cases was equally certain.