9.28 Malkiel’s Bond Theorems
Bond prices and yields are inversely related.
Bond price volatility and time-to-maturity are positively related.
As term-to-maturity increases, price-volatility increases at a decreasing rate.
Holding time-to-maturity constant, a decrease in market-yield will raise price (in absolute dollar terms) more than the same size increase in market-yield will lower price.
Price volatility increases as coupons decrease.
Burton G. Malkiel,
“Expectations, Bond Prices, and the Term Structure of Interest Rates,”
Quarterly Journal of Economics 76, no. 2 (May 1962): 197-218.
As YTM rises, duration (and hence volatility) decline.
Homer, Sidney & Leibowitz, Martin L. (1972),
Inside the Yield Book: New Tools for Bond Market Strategy
