Bond Yields & Duration

What you'll learn

• ✓Compute duration
• ✓Predict price move from rate shift

Lessons

1. 💥
   Same Shock, Different Damage

   Why one rate hike hits two bonds completely differently
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2. Yield to Maturity, Precisely

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3. Macaulay Duration

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4. Modified Duration: The Workhorse

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5. Pricing a Rate Shock

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6. Final Boss: Duration in the Wild

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Sources

All content is drawn from the sources below. We deliberately avoid unverified material.

• Bond Markets, Analysis, and Strategies (Frank J. Fabozzi)
  Pearson · book
  Primary textbook reference for YTM as the IRR of a bond's cash flows, Macaulay duration, modified duration, and convexity. Standard fixed-income treatment used across the module.
• Fixed Income Securities (Bruce Tuckman)
  Wiley · book
  Reference for the precise definitions of yield to maturity (Ch. 3) and the duration / convexity decomposition of price changes (Ch. 4).
• Understanding Fixed-Income Risk and Return
  CFA Institute (Fixed Income curriculum reading) · academic
  Reference for Macaulay vs modified duration, the price-change approximation, and the role of convexity. CFA Institute curriculum, Level I / II Fixed Income.
  https://www.cfainstitute.org/programs/cfa
• Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856 (Frederick Macaulay)
  NBER · academic
  Original 1938 paper introducing what we now call Macaulay duration as a weighted-average time to cash flows.
• DUR <GO> and bond risk analytics documentation
  Bloomberg Terminal Help · reference
  Practitioner reference for how modified duration and convexity are computed and reported on real bond pricing screens.
• Review of the Federal Reserve's Supervision and Regulation of Silicon Valley Bank (Barr Report)
  Board of Governors of the Federal Reserve System, April 28, 2023 · institutional
  Primary source for the SVB case study: the role of duration mismatch, held-to-maturity classification, and the magnitude of unrealized losses on the bond portfolio by year-end 2022.
  https://www.federalreserve.gov/publications/files/svb-review-20230428.pdf
• FDIC Press Releases on Silicon Valley Bank receivership (March 2023)
  Federal Deposit Insurance Corporation · institutional
  Source for the timeline of the SVB failure and FDIC takeover, supporting the boss-lesson case study.
  https://www.fdic.gov/news/press-releases/2023/pr23016.html
• Investor Bulletin on Interest Rate Risk
  US Securities and Exchange Commission · institutional
  Plain-English regulator reference for interest-rate (duration) risk and how it differs from credit risk for individual bond investors.
  https://www.sec.gov/investor/alerts/ib_interestraterisk.pdf