Difference between revisions of "Documentation/How Tos/Calc: MDURATION function"
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< Documentation | How Tos
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m (term 'modified Mccaulay duration' is confusing, as called 'modified duration') |
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== MDURATION == | == MDURATION == | ||
− | + | Calculates the modified duration of a security. | |
This function is only available if the '''Analysis AddIn''' is installed. | This function is only available if the '''Analysis AddIn''' is installed. | ||
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− | : This function | + | : This function calculates the modified duration as the '''modifed''' Macaulay duration of a security, which is a measure of price volatility and interest rate sensitivity. It returns: |
:: Macaulay_duration / (1 + <tt>'''yield'''</tt>/<tt>'''frequency'''</tt>) | :: Macaulay_duration / (1 + <tt>'''yield'''</tt>/<tt>'''frequency'''</tt>) | ||
Revision as of 17:29, 7 February 2011
MDURATION
Calculates the modified duration of a security.
This function is only available if the Analysis AddIn is installed.
Syntax:
MDURATION(settlementdate; maturitydate; rate; yield; frequency; basis)
- settlementdate: the settlement (purchase) date of the bond.
- maturitydate: the maturity (redemption) date of the bond.
- rate: the (annual) interest rate of the bond.
- yield: the (annual) yield of the bond.
- frequency: the number of interest payments per year (1, 2 or 4).
- basis: is the calendar system to use. Defaults to 0 if omitted.
- 0 - US method (NASD), 12 months of 30 days each
- 1 - Actual number of days in months, actual number of days in year
- 2 - Actual number of days in month, year has 360 days
- 3 - Actual number of days in month, year has 365 days
- 4 - European method, 12 months of 30 days each
- This function calculates the modified duration as the modifed Macaulay duration of a security, which is a measure of price volatility and interest rate sensitivity. It returns:
- Macaulay_duration / (1 + yield/frequency)
- The Macaulay duration is returned by the DURATION_ADD function. See that description for further details.
Example:
MDURATION("2008-2-28"; "2010-8-31"; 5%; 6%; 2; 0)
- returns approximately 2.33 years.
Issues:
- This function uses YEARFRAC in the calculation. There are known slight inaccuracies (both in Calc and in Excel) in YEARFRAC.