pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
...... Whether the CD's cash flows would be valued differently on the open market is irrelevant because it is not valued on an open market. .....
Part of my point was that the notion of duration doesn't apply well to CDs because duration is a measure of price sensitivity to changes in interest rates and CDs aren't traded on the open market like bonds are. But one could argue that almost any cash flows can be sold and IF the cash flows were sold then the amount someone would be willing to pay for those cash flows would be less than the CD deposit amount (par vlaue) and that price sensitivity could then be measured.
........Instead, my Ally CD has a sixty day early redemption penalty I can pay to reset the rate at market levels. And besides, the market would also value that put option which would keep the CD trading at roughly anyway. ........
I agree and acknowledged the same on my prior post. I'll admit that the put option is much more attractive than what I thought it would be and it makes the CD much more attractive relative to a bond with similar term and coupon in a period of rising interest rates.