9 lines
572 B
Markdown
9 lines
572 B
Markdown
**Higher duration = greater price sensitivity to interest rate changes.**
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Duration ties together everything we've covered about volatility — it's a single number that captures the combined effect of both maturity and coupon:
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- Longer maturity → higher duration → more volatile
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- Lower coupon → higher duration → more volatile
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- Zero coupon bond → duration equals its full term (most volatile of all — no coupons to cushion rate changes)
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That's why duration is so useful — instead of comparing maturity AND coupon separately, you just compare one number. |