duration {termstrc}R Documentation

Duration, modified Duration and Duration based Weights

Description

The function calculates the Macauly duration, modified duration and duration based weights.

Usage

duration(cf_p, m_p, y)

Arguments

cf_p cashflows matrix including the prices of the bonds.
m_p maturity matrix, the first row is filled with zeros.
y yields of the bonds.

Details

The duration vector is calculated using the following formula:

bm{d}= frac{bm{iota}'(bm{C}cdotbm{M}cdotbm{D})}{bm{iota}'(bm{C}cdotbm{D})},

whereas bm{C} is the cashflow matrix and bm{M} is the maturity matrix. bm{iota} is a column vector filled with ones. (cdot) denotes a elementwise matrix mulitplication and " ' " the transpose of a vector (matrix).

The weight omega_j for one bond j is defined as

omega_j=frac{frac{1}{d_j}}{sum_{i=1}^mfrac{1}{d_i}},

where d_j is the duration of the j-th bond.

Value

The function returns a matrix with three columns, i.e. duration, modified duration and duration based weights.


[Package termstrc version 1.1 Index]