Duration, Convexity, and Rate Risk

Duration, convexity, curve-risk, and interest-rate sensitivity terms for fixed income.

This section keeps related fixed-income terms together so readers can move from the core bond concept into the specific mechanics that matter for pricing, risk, issuer type, market structure, or portfolio use.

In this section

• Convexity And Yield Curve Risk
  Fixed-income terms for convexity, negative convexity, and yield-curve risk.
  • Convexity
    Fixed-income measure showing how a bond's duration changes as yields move, improving rate-risk analysis.
  • Negative Convexity
    Bond-price behavior where upside is constrained as yields fall, often because embedded options change expected cash flows.
  • Yield Curve Risk
    Fixed-income risk that changes in the slope or shape of the yield curve can hurt a bond portfolio even when average rates barely move.
• Duration Measures And Price Sensitivity
  Fixed-income terms for average life, duration, dollar duration, effective duration, key-rate duration, Macaulay duration, and modified duration.
  • Average Life: Measure of Bond Duration
    A somewhat artificial measure used to compare bonds of different duration and repayment schedules. It is calculated as the average of the periods for which funds are available, weighted by the amounts available in each of these periods.
  • Dollar Duration
    Dollar-based bond risk measure showing how much a position's value should change for a one-basis-point move in yield.
  • Duration
    Interest-rate sensitivity measure showing how strongly a bond's price should react to yield changes.
  • Effective Duration
    Bond sensitivity measure for callable or prepayable structures where expected cash flows can change as rates move.
  • Key Rate Duration
    Yield-curve sensitivity measure showing how exposed a bond or portfolio is to one specific maturity point on the curve.
  • Macaulay Duration: Measuring the Weighted Timing of Bond Cash Flows
    Learn what Macaulay duration measures, how the formula works, and why it is foundational for fixed-income interest-rate analysis.
  • Modified Duration
    Bond price-sensitivity measure that estimates how much price should change for a small change in yield.
• Holding Period And Treasury Curve Context
  Fixed-income terms for anticipated holding periods, interpolated yield curves, and on-the-run Treasury yield curves.
  • Anticipated Holding Period: Expected Investment Duration
    The expected duration an investor plans to hold a particular investment before selling it.
  • Interpolated Yield Curve (I Curve): Definition, Applications, and Importance
    An in-depth exploration of the Interpolated Yield Curve (I Curve), including its definition, applications, importance in financial markets, and methodology.
  • On-The-Run Treasury Yield Curve: Definition, Mechanism, and Significance
    A comprehensive guide on the On-The-Run Treasury Yield Curve, explaining its definition, how it works, its significance in the financial markets, historical context, and applications.