Hostname: page-component-586b7cd67f-dsjbd Total loading time: 0 Render date: 2024-11-24T04:49:20.970Z Has data issue: false hasContentIssue false
  • English
  • Français

Duration and Bond Portfolio Analysis: An Overview

Published online by Cambridge University Press:  06 April 2009

G. O. Bierwag ,
George G. Kaufman  and
Chulsoon Khang
Get access Rights & Permissions [Opens in a new window]

Extract

In recent years, academicians and practitioners have been using the concept of duration more frequently in the analysis of debt securities. Although the use of duration has greatly expanded our insights into the behavior of bond prices and bond risk, it has given rise to a considerable degree of confusion and misunderstanding. The purpose of this review paper is twofold: (1) to clarify the record on what duration is and is not and what it can do and cannot do, and (2) to discuss the appropriate uses of duration in the analysis of security portfolios.

Type
III. Duration and Portfolio Strategy
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 4 , November 1978 , pp. 671 - 681
Copyright
Copyright © School of Business Administration, University of Washington 1978

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Bierwag, G. O. “Immunization, Duration, and the Term Structure of Interest Rates.” Journal of Financial and Quantitative Analysis, (12 1977), pp. 725–741.CrossRefGoogle Scholar
[2]Bierwag, G. O. “Measures of Duration.” Economic Inquiry (10 1978), pp. 497–507.CrossRefGoogle Scholar
[3]Bierwag, G. O.. “Dynamic Immunization Portfolio Policies.” Journal of Banking and Finance (forthcoming).Google Scholar
[4]Bierwag, G. O., and Kaufman, George G.. “Coping with the Risk of Interest Rate Fluctuations; A Note.” Journal of Business (07 1977), pp. 364–370.CrossRefGoogle Scholar
[5]Bierwag, G. O. “Bond Portfolio Strategy Simulations: A Critique.” Journal of Financial and Quantitative Analysis (09 1978), pp. 519–525.CrossRefGoogle Scholar
[6]Bierwag, G. O., and Khang, Chulsoon. “An Immunization Strategy Is a Minimax Strategy.” Journal of Finance (forthcoming).Google Scholar
[7]Bierwag, G. O.; Kaufman, George G.; and Khang, Chulsoon. “Immunization Strategies and Their Implications.” Center for Capital Market Research, University of Oregon (1978).Google Scholar
[8]Bradley, Stephen P., and Crane, Dwight B.. Management of Bank Portfolios. New York: Wiley and Sons (1975).Google Scholar
[9]Cooper, Ian. “Asset Values, Interest-Rate Changes, and Duration.” Journal of Financial and Quantitative Analysis (12 1977), pp. 701–723.CrossRefGoogle Scholar
[10]Fisher, Lawrence. “An Algorithm for Finding Exact Rates of Return.” Journal of Business (01 1966), pp. 111–118.CrossRefGoogle Scholar
[11]Fisher, Lawrence, and Weil, Roman L.. “Coping with the Risk of Interest Rate Fluctuations: Returns to Bondholders from Naive and Optimal Strategies.” Journal of Business (10 1971), pp. 408–431.CrossRefGoogle Scholar
[12]Fishburn, Peter C. “Mean-Risk Analysis with Risk Associated with Below-Target Returns.” American Economic Review (03 1977), pp. 116–126.Google Scholar
[13]Fogler, Russel H.; Groves, William A.; and Richardson, James C.. “Bond Portfolio Strategies, Returns and Skewness: A Note.” Journal of Financial and Quantitative Analysis (03 1977), pp. 127–140.CrossRefGoogle Scholar
[14]Grove, M. A. “A Model of the Maturity Profile of the Balanced Sheet.” Metroeconomica (04 1966), pp. 40–55.CrossRefGoogle Scholar
[15]Grove, M. A. “On ‘Duration’ and the Optimal Maturity Structure of the Balance Sheet.” The Bell Journal of Economics and Management Science (Autumn 1974), pp. 696–709.CrossRefGoogle Scholar
[16]Hackett, T. A Simulation Analysis of Immunization Strategies Applied to Bond Portfolios. Doctoral Dissertation, Dept. of Economics, University of Oregon (1978).Google Scholar
[17]Hicks, J. R.Value and Capital. Oxford University Press (1946).Google Scholar
[18]Hopewell, M. H., and Kaufman, George G.. “Bond Price Volatility and Term to Maturity: A Generalized Respecification.” American Economic Review (09 1973), pp. 479–453.Google Scholar
[19]Jonathan, Ingersoll “Measuring Risk and Return for Bonds: A New Approach.” Journal of Bank Research (Summer 1978), pp. 82–90.Google Scholar
[21]Kaufman, George G. “Duration, Planning Period, and Tests of the Capital Asset Pricing Model.” Paper prepared for the annual meeting of the Eastern Finance Association, Atlanta (04 1978).Google Scholar
[22]Khang, Chulsoon. “Bond Immunization When Short-Term Rates Fluctuate More Than Long-Term Rates.” Journal of Financial and Quantitative Analysis (forthcoming).Google Scholar
[23]Lanstein, Ronald, and Sharpe, William F.. “Duration and Security Risk.” Journal of Financial and Quantitative Analysis (11 1978).CrossRefGoogle Scholar
[24]Macaulay, F. R.Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields, and Stock Prices in the U.S. since 1856. New York: National Bureau of Economic Research (1938).Google Scholar
[25]Redington, F. M. “Review of the Principle of Life Office Valuations.” Journal of the Institute of Actuaries, Vol. 18 (1952), pp. 286–340.CrossRefGoogle Scholar
[26]Samuelson, P. A. “The Effect of Interest Rate Increases on the Banking System.” American Economic Review (03 1945), pp. 16–27.Google Scholar
[27]Watson, Ronald D. “Tests of Maturity Structures of Commercial Bank Government Securities Portfolios: A Simulation Approach.” Journal of Bank Research (Spring 1972), pp. 34–46.Google Scholar
[28]Yawitz, Jess. “The Relative Importance of Duration and Yield Volatility on Bond Price Volatility.” Journal of Money, Credit and Banking (02 1977), pp. 97–102.CrossRefGoogle Scholar
[29]Yawitz, Jess B.; Hempel, George H.; and Marshall, William J.. “A Risk-Return Approach to the Selection of Optimal Government Bond Portfolios.” Financial Management (Autumn 1976), pp. 35–45.CrossRefGoogle Scholar