I am pricing an MBS under three different rate scenarios: a base case, +5bps and -5bps

I compute partial durations on the base case using the wave method (P. Hagan: Calculating Delta Risks and Hedges via Waves) using 5 bps shock

I sum the partial durations and get my wave base duration

If I compute the duration as a result of the prices on the +/- bps scenarios why this duration be different than the sum of my partials on the wave method

The rate scenarios are parallel shifts.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.