Investing in bonds often seems like a safe bet, but understanding bond duration risk can help you better protect your portfolio. Bond duration risk refers to the sensitivity of a bond’s price to changes in interest rates. When interest rates rise, bond prices typically fall, and the longer the duration, the more significant the impact.
What is duration risk?
Duration risk is the potential loss that an investor faces due to changes in interest rates. It is a measure of the sensitivity of a bond's price to changes in interest rates and is an important concept in finance and investment. Duration risk is an essential concept in finance and investment as it provides a measure of risk and potential loss.
What is a bond duration?
Duration is a measure of the sensitivity of a bond's price to changes in interest rates. It is a measure of the average time it takes for the cash flows from a bond to be received by the investor and is expressed in years.
