Definition
Key rate duration measures a bond's price sensitivity to yield changes at specific maturity points (key rates) on the curve rather than parallel shifts. It helps understand how non-parallel yield curve movements affect portfolio value. Bonds have different key rate exposures based on their cash flow timing.
Example
A bond has high 10-year key rate duration but low 2-year. It's more sensitive to 10-year rate changes than short-term changes.
FAQ
What is Key Rate Duration?
Sensitivity of a bond's price to changes at specific points on the yield curve.
Why is Key Rate Duration important?
Key Rate Duration helps investors evaluate fixed income and make more informed decisions.