Duration - TI BA II pro

higaurav

New Member
I was trying to calculate the duration in the inbuilt function "BOND" given in the new texas BA II pls pro. Here is the question: $1000 Par, 4% semiannual, 10 years to maturity, 6% yield..

In case using the formula =( V(-20bps) - V(+20bps))/(2*V(0)*delta Y) gives the result 7.93

But now when i try using this by directly using the bond worksheet..

Inputing the following values =
SDT = 12-31-1990
CPN = 40
RDT = 12-31-2000
RV = 1000
Actual
2/y
YLD = 6

I get the price of the bond to be 851.23, this is correct. But the duration comes to be 5.42.

Is there something wrong in my calculations above/ or some difference in these two durations. Any one please suggest.
 

David Harper CFA FRM

David Harper CFA FRM
Subscriber
Higaurav,

Please see Telon's comments from last year, he provided some really helpful tips on using the built-in bond worksheet (i think you want 4 instead of 40 for the coupon. But then again, Telon says you want to convert the 4 to a effective annual. He says it's a mod duration only ):

http://www.bionicturtle.com/learn/article/texas_instruments_ba_ii_plus_ti_ba_ii_essential_functions_for_the_frm/

For me, i don't like the bond worksheet for our purpose. (as i understand, it won't give you convexity, so it's not like it's full service). And for duration, I like that the formula is a straight up implement of the idea, I sort of think the formula helps understand the idea: you are re-pricing the bond up and down, dividing that percentage price change by the total shock.

David
 
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