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Immunisation - Volatility

S

sammus

Member
Hi,

I'm a bit confused on how volatility relates to DMT in relation to immunisation.

I've gone through my tutorial notes, and have it written down that Volatility = DMT / (1 + i). I'm not sure how this relationship is worked out - when I work through the calculations (below) I get Volatility = DMT * (1 + i). What am I missing?

upload_2019-9-14_10-18-20.png

TIA
 
When you differentiate you need to put a bracket round the (t+1) in the power. That is, it should be (1+i)^-(t+1), so that we deduct one from the power, whereas you have added one to the power. Then it works as expected.
Robert
 
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