Banner Ad 1

Collapse

Announcement

Collapse
No announcement yet.

Why does duration suddenly increase after coupon payment?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Why does duration suddenly increase after coupon payment?

    If I have a duration of 10, it makes sense that right before the coupon payment my duration becomes 9 as a year has passed. However, I'm failing to understand the reasoning behind the sudden increase in duration.

    Without any specific example, let's pretend that after the first payment duration is 9.3 (I just made this number up).

    Does anyone know why?

    EDIT: I understand how this is seen in the computation. Obviously, duration will be smaller when the duration of a single cash flow is 0. But is there a verbal explanation of this?
    Last edited by Nicklovn; May 21 2014, 08:37 PM.
Working...
X