Actuarial Outpost Duration of a bond using BAIII+ Professional
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#1
06-24-2012, 12:49 PM
 chrisjkeeney Member CAS SOA Join Date: May 2012 Location: Kings Landing Studying for FM College: Westeros Uni Favorite beer: Smithwick's Posts: 45
Duration of a bond using BAIII+ Professional

I read that the professional model is capable of calculating the duration of a bond where as the plus model cannot.

I just now covered duration of a bond in the ASM manual, but they do not show you how to do it on the calculator. How do you use the professional to calculate the duration of a bond? Also, is this assumed to be Mac or Mod? I assume Mac and then discount it to calculate mod.

When googling for a couple minutes, I did not yield a result, so I figured it'd be easier to come here instead.

Best!

Edit: Title should read BaII+ Professional. I got a little too excited there.

Last edited by chrisjkeeney; 06-24-2012 at 01:37 PM..
#2
07-06-2012, 03:42 AM
 Kaner3339 Member SOA Join Date: Jun 2011 Location: Canada Studying for MLC & MFE Posts: 964

Upon glancing at the table of contents of the user manual for the BAII plus I find no such mention of calculating a duration directly. Finding the components isn't all that hard though right?
#3
07-06-2012, 07:39 AM
 Byram Member Join Date: Jan 2012 Studying for MFE College: University of Connecticut Favorite beer: UFO Posts: 40

Using this example bond from an Actex problem:

n=5, annual coupon of 8%, par value 2000, i= 7%.

I threw this into the bond worksheet on the BAII+ Professional and it

1. Gave me a different price than I calculated myself (gave 104.10. I calculated 2082.00 by hand, which worked for the problem)
I forgot it gives price as a percentage of par value, so it was actually correct.

2. Gave me the modified duration on the "DUR=" line.

So to answer your question, it just gives the modified duration, and you can only do this with bonds it appears, I haven't seen any duration settings applied to custom cash flows.

Last edited by Byram; 07-06-2012 at 07:45 AM..
#4
07-12-2012, 09:47 PM
 Kaner3339 Member SOA Join Date: Jun 2011 Location: Canada Studying for MLC & MFE Posts: 964

Yea I'm beginning to learn everything about the calculator now and he's right about the bond duration. I'm only now starting to use CF, BOND, and AMORT. This stuff could come in handy for sure.

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