Duration - TI BA II pro

[higaurav]

I was trying to calculate the duration in the inbuilt function "BOND" given in the new texas BA II pls pro. Here is the question: $1000 Par, 4% semiannual, 10 years to maturity, 6% yield..

In case using the formula =( V(-20bps) - V(+20bps))/(2*V(0)*delta Y) gives the result 7.93

But now when i try using this by directly using the bond worksheet..

Inputing the following values =
SDT = 12-31-1990
CPN = 40
RDT = 12-31-2000
RV = 1000
Actual
2/y
YLD = 6

I get the price of the bond to be 851.23, this is correct. But the duration comes to be 5.42.

Is there something wrong in my calculations above/ or some difference in these two durations. Any one please suggest.

 

[David Harper CFA FRM]

Higaurav,

Please see Telon's comments from last year, he provided some really helpful tips on using the built-in bond worksheet (i think you want 4 instead of 40 for the coupon. But then again, Telon says you want to convert the 4 to a effective annual. He says it's a mod duration only ):

http://www.bionicturtle.com/learn/article/texas_instruments_ba_ii_plus_ti_ba_ii_essential_functions_for_the_frm/

For me, i don't like the bond worksheet for our purpose. (as i understand, it won't give you convexity, so it's not like it's full service). And for duration, I like that the formula is a straight up implement of the idea, I sort of think the formula helps understand the idea: you are re-pricing the bond up and down, dividing that percentage price change by the total shock.

David