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Summary: 1/90
Chapter 6. Variable interest rates and portfolio insurance.
Manual for SOA Exam FM/CAS Exam 2.
Chapter 6. Variable interest rates and portfolio insurance.
Section 6.4. Duration, convexity.
c 2009. Miguel A. Arcones. All rights reserved.
Extract from:
"Arcones' Manual for the SOA Exam FM/CAS Exam 2,
Financial Mathematics. Fall 2009 Edition",
available at http://www.actexmadriver.com/
c 2009. Miguel A. Arcones. All rights reserved. Manual for SOA Exam FM/CAS Exam 2.
2/90
Chapter 6. Variable interest rates and portfolio insurance. Section 6.4. Duration, convexity.
Duration
Next we will assume that the rate of interest is constant over
maturity.
Definition 1
The duration (or Macaulay's duration) of a cashflow
Contributions C1 C2 · · · Cn
Time in years 1 2 · · · n
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