Question #69
Reading: Reading 25 The Term Structure and Interest Rate Dynamics
PDF File: Reading 25 The Term Structure and Interest Rate Dynamics.pdf
Page: 28
Status: Unattempted
Question
Which of the following best describes key rate duration? Key rate duration is determined by:
Answer Choices:
A. shifting the whole yield curve in a parallel manner
B. changing the yield of a specific maturity
C. changing the curvature of the entire yield curve
Explanation
Key rate duration can be defined as the approximate percentage change in the value of a
bond or bond portfolio in response to a 100 basis point change in a key rate, holding all
other rates constant, where every security or portfolio has a set of key rate durations, one
for each key rate maturity point.