Modified Duration , MacDuration and Approx ModDU and MacDU

[HedgeFudge]

Hey guys ,
Can someone kindly explain whats the difference between the approx ModDu ,approx MacDU and the normal modDU/MacDU ?
Apart from the formula whats the difference ? what do they stand for ?
Regards,
HedgeFudge

 

[S2000magician]

I’ve never heard of approximate Macaulay duration.
Properly, modified duration should be calculated using smaller and smaller values for ΔYTM, taking the limit as ΔYTM approaches zero. It’s a calculus thing. Nobody does that. Instead, they use some standard value for ΔYTM, knowing that their calculation will be off by a small bit; hence: approximate modified duration.
Similarly for effective duration.

 

[HedgeFudge]

Ah , well in schweser there was MacDu and then Approx MacDu . but anyways , thanks to your explanition I cracked it out
Thanking ,
Fudge

 

[tickersu]

I think the “approximate” Mac Duration they are referring to comes from multiplying the approx mod duration by (1+r). Basically, using the approximate modified duration to back out the macaulay duration. Maybe schweser considers this method an approximate macaulay duration?

 

[S2000magician]

tickersu wrote:I think the “approximate” Mac Duration they are referring to comes from multiplying the approx mod duration by (1+r). Basically, using the approximate modified duration to back out the macaulay duration. Maybe schweser considers this method an approximate macaulay duration?

I see.
Silly way to get to Macaulay duration, but it certainly would be approximate if you did.