Key Rate Duration
- Holding all other maturities constant, this measures the sensitivity of a security or the value of a portfolio to a 1% change in yield for a given maturity.
The calculation is as follows:
P- = Security's price after a 1% decrease in yield
P+ = Security's price after a 1% increase in yield
P0 = Security's original price
There are 11 maturities along the Treasury spot rate curve, and a key rate duration is calculated for each. The sum of the key rate durations along a portfolio yield curve is equal to the effective duration of the portfolio.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
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