@15:17 when slope is higher, risk should be higher considering one unit change along Y axis and corresponding thing along X axis. So risk should be higher at higher yields? Where i got wrong?
Got it! Interest rate risk is inversely proportional to the current yield to maturity of a bond-the higher the yield to maturity, the less the price will change for a given change in interest rates. This makes sense because any change in interest rates will be a smaller percentage of a high YTM than for a smaller YTM.
Duration is higher for lower yields and vice versa. This is because, for example, when a bond’s yield is already high, then changes in interest rates will have less effect on its price than on a bond with a lower yield. Thus, if interest rates increase by 1%, or 100 basis points, then the price of a bond with a yield of 10% will drop less than a bond with a yield of 4%, because 1% is only 1/10th of 10%, but ¼ of 4%IFT support team
![Yailin La Mas Viral, @kreizyk.official - Dale 2 (Remix) [Video Oficial]](http://i.ytimg.com/vi/JaYHBzgqz94/mqdefault.jpg)
"if you are explaining duration to your boss who is not a smart man use 3rd method" LOL
@15:17 when slope is higher, risk should be higher considering one unit change along Y axis and corresponding thing along X axis. So risk should be higher at higher yields? Where i got wrong?
Got it! Interest rate risk is inversely proportional to the current yield to maturity of a bond-the higher the yield to maturity, the less the price will change for a given change in interest rates. This makes sense because any change in interest rates will be a smaller percentage of a high YTM than for a smaller YTM.
Duration is higher for lower yields and vice versa. This is because, for example, when a bond’s yield is already high, then changes in interest rates will have less effect on its price than on a bond with a lower yield. Thus, if interest rates increase by 1%, or 100 basis points, then the price of a bond with a yield of 10% will drop less than a bond with a yield of 4%, because 1% is only 1/10th of 10%, but ¼ of 4%IFT support team
great as always..
GREAT
amazing !!!.... makes leaning so easy...hats off...:D
very organised
you are awesome! you have great sense of humour too ;) thanks a lot sir.
Where is the Understanding fixed income risk and return video??
You can find all the videos by signing up for the free video package on this link:
ift.world/product/basic-package-lev1-dec/
IFT Support Team
Thanks,
good one ! :)