Interest Rate Risk of Bond Prices on Macedonian Stock Exchange - Empirical Test of the Duration, Modified Duration and Convexity and Bonds Valuation
Year: 2013
Type: article
Abstract: This article presents a valuation of Treasury Bonds (T-Bonds) on the Macedonian Stock Exchange (MSE) and an empirical test of duration, modified duration and convexity of the T-bonds at MSE in order to determine sensitivity of bonds prices on interest rate changes. The main goal of this study is to determine how standard valuation models fit in case of T-Bonds that are traded on MSE and to verify whether they offer reliable results compared with average bonds prices on MSE. We test the sensitivity of T-Bonds on MSE on interest rate changes and determine that duration and convexity jointly are a more accurate measure as approximation of bond prices changes than duration only. Our final conclusion is that T-Bonds traded at MSE are not sensitive on interest rate changes due to institutional investors’ permanent higher demand, while at the same time the market has a limited offer of risk-free instruments.
Authors: Zoran Ivanovski, Toni Draganov Stojanovskib, Nadica Ivanovska
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $944
OpenAlex ID: W2154904044