DurationConvexity.DurationWithExplicitTime Method 

Evaluates the duration of a bond with a continuous interest yield where the cash flows (or payments) made in terms of amount and time of payment are known.

Parameters

yield

The continuous compounded yield paid by the bond expressed in decimal format (i.e. 1 percent = 0.01).

payments

An array of doubles where the first element represents the first payment from the bond, the second the second payment and so on.

time2Payments

An array of doubles where the first element represents the time in years until the first payment is made, the second the time in years until the second payment is made and so on.

principleSum

The principle sum paid by the bond at maturity.

maturity

The time in years until the bond matures.

Return Value

The duration of the bond.

Remarks

Example

Here we illustrate the application of this method to evaluate the duration of a two year coupon bond which has a (continuously compounded) yield of 4.93 percent per annum, has a principle sum of 100 USD, and pays coupons of 2.5 USD at maturities 0.5, 1, 1.5, and 2 years, and has exactly 2 years until maturity.

Parameter values required to solve this problem:

1. yield = 0.0493
2. payments = {2.5, 2.5, 2.5, 2.5}
3. time2Payments = {0.5, 1.0, 1.5, 2.0}
4. principleSum = 100
5. maturity = 2.0

Answer evaluated using these parameters:

The Duration of the bond is:

1.92801853919072

See Also

DurationConvexity Class | WebCab.COM.Finance.Bonds Namespace