Total Horizon Return
Sum of all return components over the holding period.
Total horizon return combines carry, roll-down, price effect, and reinvestment returns to give the all-in return from holding and selling a bond at the horizon. It's expressed as a percentage of the initial investment (dirty price × notional).
Formula
Variables
| R_{total} | Total return (% of initial investment) |
| R_{carry} | Carry return from coupon income |
| R_{rolldown} | Roll-down return from aging |
| R_{price} | Price return from yield changes |
| R_{reinvest} | Reinvestment return from coupon compounding |
Assumptions
- Horizon date is before bond maturity
- Bond is sold at horizon at market price
- Yield change is a parallel shift
- Coupons reinvested at specified rate until horizon
Related Terms
Horizon Analysis
Projects bond returns for a holding period shorter than maturity.
Yield to Maturity (YTM)
The annualized return if you hold the bond to maturity, assuming all coupons are reinvested at the same rate.
DV01
Dollar change in value for a 1 basis point (0.01%) yield move.
Modified Duration
Measures the percentage price change for a 1% yield change.