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A REVIEW OF BOND DURATION MEASURE IN FINANCIAL MANAGEMENT

A REVIEW OF BOND DURATION MEASURE IN FINANCIAL MANAGEMENT The last two decades were characterised by uncertainty in financial markets due to volatile interest rates. Consequently bond and money managers were interested in minimising interest rate risk. This was accomplished by developing immunisation strategies derived from the concept of duration. Consequently, almost all the relevant literature is limited to bond portfolio management. In this paper duration and immunisation concepts are discussed in the context of financial management working capital management and capital budgeting techniques. In Section I, a brief review of bond duration measure is made. Section II describes the application of duration measures in bond immunisation strategies. In Section III, a duration measure is developed for working capital management technique. Section IV contains some secondary capital budgeting technique based on duration measure. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

A REVIEW OF BOND DURATION MEASURE IN FINANCIAL MANAGEMENT

Kulkarni, Mukund S.
Managerial Finance , Volume 15 (3): 5 – Mar 1, 1989
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References (8)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0307-4358
DOI
10.1108/eb013615
Publisher site
See Article on Publisher Site

Abstract

The last two decades were characterised by uncertainty in financial markets due to volatile interest rates. Consequently bond and money managers were interested in minimising interest rate risk. This was accomplished by developing immunisation strategies derived from the concept of duration. Consequently, almost all the relevant literature is limited to bond portfolio management. In this paper duration and immunisation concepts are discussed in the context of financial management working capital management and capital budgeting techniques. In Section I, a brief review of bond duration measure is made. Section II describes the application of duration measures in bond immunisation strategies. In Section III, a duration measure is developed for working capital management technique. Section IV contains some secondary capital budgeting technique based on duration measure.

Journal

Managerial Finance – Emerald Publishing

Published: Mar 1, 1989

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