9.1 Chapter Nine Learning Objectives

In this three-part chapter, you will:

1. Calculate and interpret all of the following:
   1. The Dollar Value of a Basis Point (“DV-01”)
   2. Average Life
   3. Average Life of the Cash Flow
   4. Maturity Pull
   5. Duration
   6. Duration Drift
   7. Dollar Duration
   8. Convexity
   9. Dollar Convexity
2. Express Duration in terms of its “Analog.” What is meant by a bond’s “hiccup”?
3. Relate the manner of interplay between a bond’s Cash flow, Term-to-maturity, Yield-to-maturity on the one-hand, and Dollar Price, Duration, and Convexity on the other.
4. Articulate the nuances embedded in the Price-Yield Curve.
5. Utilize both Duration and Convexity to predict price movements.
6. Differentiate between the following:
   1. Macaulay Duration
   2. Modified Duration
   3. Price Risk
   4. Reinvestment Risk
7. Outline several Bond Portfolio Investment Strategies.
8. Elaborate upon the manner in which Negative Convexity comes about.