| Title: |
Estimating Modified Duration and Convexity for Income Properties |
| Authors: |
Handforth, Frank; Bland, Eugene M.; Riley, Neil F. |
| Source: |
The Coastal Business Journal |
| Publisher Information: |
CCU Digital Commons |
| Publication Year: |
2022 |
| Collection: |
Coastal Carolina University: CCU Digital Commons |
| Subject Terms: |
Advertising and Promotion Management; Curriculum and Instruction; E-Commerce; Economics; Higher Education; Hospitality Administration and Management; Marketing; Real Estate; Recreation Business; Tourism and Travel |
| Description: |
Some institutions hold income producing properties directly as part of an investment portfolio. These properties are subject to interest rate risk. The two widely used measures of interest rate risk are modified duration and convexity. These measures can be difficult to calculate directly for income properties when net operating income and cash flows are not constant or when they are functions of the underlying yield. A numerical technique using sensitivity analysis is developed to provide estimates of modified duration and convexity. These estimates can then be used, along with corresponding values for debt, to determine the modified duration and convexity of the equity of the property. This can be extended to a portfolio of properties. The measurement of the interest rate risk of the equity of a portfolio of properties, using conventional interest rate risk measures, has a number of useful applications. |
| Document Type: |
text |
| File Description: |
application/pdf |
| Language: |
unknown |
| Relation: |
https://digitalcommons.coastal.edu/cbj/vol15/iss1/1; https://digitalcommons.coastal.edu/context/cbj/article/1090/viewcontent/cbj_v15_2016_spring_01_HandforthBlandRiley.pdf |
| Availability: |
https://digitalcommons.coastal.edu/cbj/vol15/iss1/1; https://digitalcommons.coastal.edu/context/cbj/article/1090/viewcontent/cbj_v15_2016_spring_01_HandforthBlandRiley.pdf |
| Accession Number: |
edsbas.F0F37ED7 |
| Database: |
BASE |