10-16 Price volatility of a bond can be estimated by multiplying the bond's modified duration by the adverse daily yield move.

Question

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This is a commonly used formula for estimating the price volatility of a bond. The modified duration measures the bond's sensitivity to interest rate changes, while the adverse daily yield move estimates the potential change in yield over a given time period. Multiplying these two values can provide an estimate of the potential price change of the bond for a given shift in interest rates.

10-16 Price Volatility of a Bond Can Be Estimated by Multiplying