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Asset Values, Interest-Rate Changes, and Duration

Published online by Cambridge University Press:  19 October 2009

I. A. Cooper
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Extract

Much effort has been recently devoted to investigating and expounding the properties of the measure called “duration.” Two properties claimed for duration are (1) that it is a good indicator of the average life of a payments stream and (2) that it measures the elasticity of the present value of such a stream with respect to the discount rate. Unfortunately the theoretical justifications of the second, more important, property have been based upon the analysis of either a change in a discount rate constant for all future time periods, or, more generally, a parallel shift in the term structure of interest rates.

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Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 12 , Issue 5 , December 1977, pp. 701 - 723
Copyright
Copyright © School of Business Administration, University of Washington 1977

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