Original scientific paper
Autor: Mladen Trpčevski
JEL: G11, G21
doi: 10.5937/bankarstvo1502104T
SCINDEX
Summary: Interest rate risk of a bond is typically measured by means of duration and convexity. However, these measurements are based on the assumption of a flat yield curve and its parallel shifts. For the purpose of modelling more realistic cases, their modifications are used. Fisher-Weil duration is used to measure the sensitivity to parallel movements of a non-flat yield curve. M-absolute and M-square indicate to which extent a bond portfolio is immunized to non-parallel shifts of the yield curve, taking into account the given time horizon of the concerned investment. A non-flat yield curve can also be approximated by a set of selected key rates, whose duration and convexity measure the portfolio’s sensitivity to the changes in specific interest rates.