Question

What does duration tell you about the sensitivity of a bond portfolio to interest rates. What are the limitations of the duration measure?

   What does duration tell you about the sensitivity of a bond portfolio to interest rates. What are the limitations of the duration measure?

Options, Futures, and Other Derivatives

Options, Futures, and Other Derivatives

John C. Hull 10th Edition

Chapter 4, Problem 8

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It provides an estimate of how much the price of a bond or a bond portfolio will change in response to a change in interest rates. The duration of a bond portfolio takes into account the weighted average time until the cash flows from the bonds are received. It Show more…

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What does duration tell you about the sensitivity of a bond portfolio to interest rates. What are the limitations of the duration measure?

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