Specifični rizik ulaganja u obveznice: mjerenje kamatnog rizika
Specific risk of fixed income securities: measuring interest rate risk

Summary/Abstract: The research in this paper focuses on the way in which we can measure the interest rate risk of bonds. The interest rate risk is immanent to all types of bonds with fixed interest rate, and it has crucial influence on bond value. The interest rate risk is reflected in probability that the bond price will fall if there is an increase in market interest rates. Bonds interest rate risk measures include duration, modified duration, convexity and dispersion. The paper also tests the following hypotheses: (1) Duration and modified duration are good measures for interest rate risk of bonds with fixed income and fixed maturity and (2) Convexity, as a second-order measure of interest rate risk, indicates the error that we make by using duration and modified duration. All hypotheses tested in this paper have been verified.

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