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Bridge over ocean
1 January 2000 Financial Analysts Journal Volume 56, Issue 1

Interest Rate Sensitivities of Bond Risk Measures

  1. Timothy Falcon Crack
  2. Sanjay K. Nawalkha

We present a simple expression for the sensitivity of duration, convexity, and higher-order bond risk measures to changes in term-structure shape parameters. Our analysis enables fixed-income portfolio managers to capture the combined effects of shifts in term-structure level, slope, and curvature on any specific bond risk measure. These results are particularly important in environments characterized by volatile interest rates. We provide simple numerical examples.

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