Abstract
We apply polynomial least squares (PLS) techniques to the calculation of risk indicators for bonds and fixed income portfolios such as duration and convexity. These indicators can be easily obtained with few observations —three in the quadratic case, four for the cubic specification. PLS procedures can be calculated with matrix functions or with regression procedures readily available in spreadsheets. In this study we stress the educational advantages of the methodology. At the practical level, PLS procedures allow investors and analysts to calculate most important fixed income data indicators straightforwardly by simply collecting observations of market values for a bond or bond portfolio and of associated key interest rates.
Recommended Citation
(2026)
"Duration and Convexity Using Polynomial Least Squares –Some Educational Aspects,"
Journal of Economics and Finance Education: Vol. 16:
Iss.
2, Article 6.
Available at:
https://scholarship.rollins.edu/jefe/vol16/iss2/6
