2002
DOI: 10.1142/s0219024902001687
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The Heath–jarrow–morton Duration and Convexity: A Generalized Approach

Abstract: This paper extends the traditional duration measure for continuous-time Heath-Jarrow-Morton models. The result is a general Heath-Jarrow-Morton duration measure based on a zero-coupon yield for an arbitrary maturity as state variable. A convexity measure compatible to this generalized duration is derived. In addition, closed-form solutions are presented for two popular example models.

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Cited by 8 publications
(1 citation statement)
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“…Fisher and Weil (1971) show, however, that the Macaulay duration fails its immunization purpose when the yield curve does not move in parallel shifts. Many authors have extended the definition of duration to account for stochastic interest rates and non‐parallel term structure shifts: Cox et al (1979) and Wu (2000) for equilibrium single factor models, Au and Thurston (1995) and Frühwirth (2002) for Heath–Jarrow–Morton models, and Munk (1999) for multifactor models. Despite these theoretical contributions, empirical studies on immunization performance do not reach consensus on the superiority of stochastic durations over traditional durations.…”
Section: Introductionmentioning
confidence: 99%
“…Fisher and Weil (1971) show, however, that the Macaulay duration fails its immunization purpose when the yield curve does not move in parallel shifts. Many authors have extended the definition of duration to account for stochastic interest rates and non‐parallel term structure shifts: Cox et al (1979) and Wu (2000) for equilibrium single factor models, Au and Thurston (1995) and Frühwirth (2002) for Heath–Jarrow–Morton models, and Munk (1999) for multifactor models. Despite these theoretical contributions, empirical studies on immunization performance do not reach consensus on the superiority of stochastic durations over traditional durations.…”
Section: Introductionmentioning
confidence: 99%