Quick Definition

Key rate duration measures the sensitivity of the value of a bond or bond portfolio to changes in interest rates at specific maturities.

Formula

Examples

• 1A bond portfolio manager uses key rate durations to adjust the portfolio's exposure to interest rate changes at different points along the yield curve.
• 2An investor calculates key rate durations to understand how a potential rise in 5-year Treasury rates might impact their bond investments.
• 3A financial analyst uses key rate duration to forecast the impact of a central bank's interest rate policy on different segments of the bond market.

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