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Title: The Relationship Between the Price Interest Rate Risk and the Holding Period Return in a Bond Investment

Authors: Sang-Hoon Kim

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: The interest rate risk of bond investments is divided into the price interest rate risk and the holding period return risk. The former can be measured by Macaulay's duration. However, there is no instrument for the latter. This paper derives a measurement for the latter based on an elasticity similar to the duration and provides a mathematical relationship between the two risks. The relationship derived is very useful for understanding the interest rate risk of bond investments. It also allows an easy derivation of the Fisher-Weil immunization strategy without sophisticated mathematical proof.

Keywords: Interest rate risk; price interest rate risk; holding period return; bond investment; Fisher-Weil immunization.

DOI: 10.1504/JBM.1996.141022

Journal of Business and Management, 1996 Vol.3 No.3, pp.27 - 35

Published online: 05 Sep 2024 *