duration {lifecontingencies} | R Documentation |
Compute the duration or the convexity of a series of CF
Description
Compute the duration or the convexity of a series of CF
Usage
duration(cashFlows, timeIds, i, k = 1, macaulay = TRUE)
convexity(cashFlows, timeIds, i, k = 1)
Arguments
cashFlows |
A vector representing the cash flows amounts. |
timeIds |
Cash flows times |
i |
APR interest, i.e. nominal interest rate compounded m-thly. |
k |
Compounding frequency for the nominal interest rate. |
macaulay |
Use the Macaulay formula |
Details
The Macaulay duration is defined as
\sum\limits_t^{T} \frac{t*CF_{t}\left( 1 + \frac{i}{k} \right)^{ - t*k}}{P}
,
while \sum\limits_{t}^{T} t*\left( t + \frac{1}{k} \right) * CF_t \left(1 + \frac{y}{k} \right)^{ - k*t - 2}
Value
A numeric value representing either the duration or the convexity of the cash flow series
References
Broverman, S.A., Mathematics of Investment and Credit (Fourth Edition), 2008, ACTEX Publications.
Examples
#evaluate the duration/convexity of a coupon payment
cf=c(10,10,10,10,10,110)
t=c(1,2,3,4,5,6)
duration(cf, t, i=0.03)
convexity(cf, t, i=0.03)
[Package lifecontingencies version 1.3.11 Index]