Impact of bond profile on bond volatility: Evidence from India

Abstract

The main aim of this study is to investigate the relationship between bond profile and bond volatility in the Indian capital market. The dataset pertaining to the bond market has been gathered during a decade-long timeframe, spanning from 2012 to 2022. The researchers employed regression analysis, a statistical technique, to evaluate the potential influence of bond profile on bond volatility. The research findings suggest that the duration of bonds is the primary factor influencing their volatility, irrespective of their individual qualities. The findings reveal that the coupon rate does not exert a substantial influence on the conditional volatility of unsecured bonds. The empirical evidence supports a strong association between the duration of bonds and the volatility shown by unsecured bonds. Additionally, the research suggest that the evaluation of bond ratings does not have a significant impact on their conditional volatility.