CI Market Dashboard

We have put together a collection of market indicators and track them to help you gauge the direction of the market.


CI Analysis Worksheets

Interactive analysis templates covering DuPont analysis (return on equity), valuing stocks the Warren Buffett way, and more to come.


CI Blog Feed

Market Rebound Generates New Bullish Dashboard Signal
posted 15 hours ago by Wayne Thorp

Bullish Sentiment Lowest in a Year
posted 3 days ago by Wayne Thorp

Mt. Gox Likely to Begin Liquidation Process
posted 5 days ago by Wayne Thorp

Intel’s Profit Declines Again Yet Shares Rise–What’s In Store for PCs?
posted 5 days ago by Joe Lan

Today Only: Google Glass for Sale
posted 6 days ago by Wayne Thorp



Computerized Investing > Second Quarter 2013

Bond Duration & Convexity

PRINT | | | | COMMENTS (4) | A A   Reset

by Wayne A. Thorp, CFA

The last two installments of Spreadsheet Corner provided templates on how to calculate bond prices, returns and price sensitivity to changes in interest rates and time to maturity (Fourth Quarter 2012 and First Quarter 2013 issues; available online at ComputerizedInvesting.com). These articles laid the groundwork for a discussion of more advanced, and accurate, measures of bond volatility.

As bond investors, we need to be aware of the impact that changing interest rates (yields) can have on the value of bonds. Volatility measures allow us to compare bonds of differing maturities and coupon rates to find the ones that fit our investment horizon and our forecast of future interest rates. Recall that there is an inverse relationship between yield and bond prices. If interest rates go up, the value of the fixed interest and principal payment you expect to receive from the bond goes down. Conversely, if interest rates fall, the value of bonds will increase. In other words, the bond market rallies when interest rates fall (and, conversely, it falls when interest rates rise).

...To continue reading this article you must be a Computerized Investing Subscriber.

Gain exclusive access to this article and all of the benefits and investment education a Computerized Investing subscription offers.

SUBSCRIBE TODAY for just $24.
Log in
Already a CI subscriber? Login to read the rest of this article.

Subscribe
A subscription to Computerized Investing includes a monthly email and access to the CI Website, all of which aim to benefit your investing skills with respect to computers and the Internet.