What is meant by the empirical duration of a corporate bond?
What will be an ideal response?
Duration is the percentage change in a bond's price with a 100-basis-point change in yield. Empirical duration of a corporate bond refers to calculation of a bond's duration based on historical data. The calculation of empirical duration has some advantages and disadvantages over other duration calculations, such as effective duration or modified duration. The advantages of using empirical duration consist of the following. First, the estimate does not rely on theoretical formulas and analytic assumptions. Second, the only inputs needed are a reliable series of bond prices and a reliable series of Treasury yields. Some disadvantages consist of the following. First, a dependable series of a bond's price may not be available. Second, the series of prices that is obtainable might not be market based, but rather modeled or based on an analogous security.
You might also like to view...
When the expected cell frequencies are smaller than 5, the cells should be combined in a meaningful way such that the expected cell frequencies do exceed 5
Indicate whether the statement is true or false
The term "morals" is applied to a society, while the term "values" is used when referring to an individual.
Answer the following statement true (T) or false (F)
At one point in the evolution of marketing, the United States entered a buyer's market and the customer became king. Which era is being described?
A. sales-oriented B. market-oriented C. economics-oriented D. production-oriented E. value-based marketing
An investor will take as large a position as possible when an equilibrium-price relationship is violated. This is an example of
A. the mean-variance efficiency frontier. B. the capital asset pricing model. C. a risk-free arbitrage. D. a dominance argument.