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BA II Plus: Duration Price Change Step by Step

Use modified duration and convexity on the BA II Plus to estimate bond price changes.

TL;DR

Duration price-change problems are arithmetic problems: multiply modified duration by the decimal yield change and reverse the sign. Add the convexity adjustment when provided.

Formula Reference

Duration estimate

% price change = -ModDur x dy

dy is the yield change as a decimal.

Convexity adjustment

% price change = -ModDur x dy + 0.5 x Convexity x dy^2

Use for larger yield changes.

BA II Plus Keystrokes

  1. Enter modified duration
  2. Press +/- if yield increases
  3. Multiply by the yield change in decimal form
  4. For convexity, square dy
  5. Multiply by convexity and 0.5
  6. Add the duration and convexity terms

Worked Example

  • Problem: ModDur = 5.2, convexity = 35, yield rises 75 bps.
  • Duration term = -5.2 x 0.0075 = -3.90 percent.
  • Convexity term = 0.5 x 35 x 0.0075^2 = 0.098 percent.
  • Estimated price change = -3.80 percent.

Common Mistakes

  • Entering 75 instead of 0.0075.
  • Forgetting that a yield increase makes the duration term negative.
  • Applying convexity with basis points instead of decimal yield change.

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