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What is fixed income duration and why is it important?

Posted by The Dopkins Wealth Team

Jun 16, 2015 12:05:40 PM

Fixed income investors know there is an inverse relationship between interest rates and the price of fixed-income securities. When interest rates rise, prices fall. When rates decline, prices increase. There are a number of risk measures available to give investors a feel for how a specific bond or portfolio of bonds may change in value given a change in interest rates. The best way, though, to measure price sensitivity is to use duration, of which there are multiple types.

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Topics: fixed income, fixed income duration, modified duration, effective duration, interest rates





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