What is the dollar time?

DRAGACE DRAGATION is usually described as a product created in assessing the relationship between the time of the financial instrument with a price or tool value. Calculation of the duration of the dollar helps investors understand the return of the investment and thus determine whether the security is worth continuing the part of the investment portfolio. The process of calculating the duration of the dollar is particularly useful in solving investment in a fixed return, such as a bond.

The duration of the dollar is determined by comparing the market value with the product of the investment. This approach helps to measure the yield change in the event of a change that is at least one percent in the return. By calculating this period from time to time, the investor can determine whether the investment will remain on the way, and the required return that is obtained as soon as the security has been reached.

It is an easy way to understand the duration of the dollar is considered a way to monitor the rate of return to $ 100.00 (USD) investment. For example, if the duration of the dollar is associated with the givenBy bond $ 7.50, the change by one percent in the bond yield would be $ 7.50. In view of this, the investor may evaluate the relationship between yield and price and determine whether the investment works according to projections. If this is not the case, the investor may decide whether to stick to the problem of bonds or sell it and invest funds in another security option.

It is important to realize that a number of factors can affect the performance of the binding. This in turn means that the span of error associated with the dollar duration can also fluctuate, depending on the factories involved. Such factors such as the scattering in the coupon and regarding the maturity time may have a certain degree of influence. The combination of these two factors can, in turn, affect convexity or the second derivative associated with the investment.