Fixed Income Securities II: Interest-Rate Risk

  • Moorad Choudhry
  • Didier Joannas
  • Richard Pereira
  • Rod Pienaar
Part of the Finance and Capital Markets Series book series (FCMS)


In this chapter we discuss the sensitivity of bond prices to changes in market interest rates, and the key concepts of duration and convexity.


Cash Flow Bond Price Bond Yield Modify Duration Coupon Bond 
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Selected Bibliography and References

  1. Bierwag, G. O. ‘Immunization, duration and the term structure of interest rates,’ Journal of Financial and Quantitative Analysis, December 1977, pp. 725–41.Google Scholar
  2. Bierwag, G. O. ‘Measures of duration,’ Economic Inquiry, 16, October 1978, pp. 497–507.CrossRefGoogle Scholar
  3. Blake, D. and Orszag, M. ‘A closed-form formula for calculating bond convexity’, Journal of Fixed Income, 6, 1996, pp. 88–91.CrossRefGoogle Scholar
  4. Burghardt, G. The Treasury Bond Basis, McGraw-Hill, 1994, ch. 2.Google Scholar
  5. Butler, C. Mastering Value-at-Risk, FT Prentice Hall, 1998.Google Scholar
  6. Dattatreya, R. Fixed Income Analytics: State-of-the-Art Debt Analysis and Valuation Modeling, McGraw-Hill, 1991.Google Scholar
  7. Garbade, K. Fixed Income Analytics, MIT Press, 1996, chs 3, 4 and 12.Google Scholar
  8. Golub, B. and Tilman, L. Risk Management: Approaches in Fixed Income Markets, Wiley, 2000, ch. 2.Google Scholar
  9. Macaulay, F. Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1865, National Bureau of Economic Research, NY, 1938 (available from Risk Classics Publishing, under the title Interest Rates, Bond Yields and Stock Prices in the United States since 1856).Google Scholar
  10. Macaulay, F. The Movements of Interest Rates, Bond Yields and Stock Prices in the United States Since 1856, RISK Classics Library, 1999.Google Scholar
  11. Windas, T. An Introduction to Option-Adjusted Spread Analysis, Bloomberg, 1993.Google Scholar

Copyright information

© Moorad Choudhry, Didier Joannas, Richard Pereira and Rod Pienaar 2005

Authors and Affiliations

  • Moorad Choudhry
    • 1
  • Didier Joannas
    • 2
  • Richard Pereira
    • 3
  • Rod Pienaar
    • 4
  1. 1.KBC Financial ProductsUK
  2. 2.Hong KongChina
  3. 3.Nomura plcUK
  4. 4.UBS AGUK

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