In key rate question they give rate durations or key rate durations next to a particular bond or security IN A TABLE FORM. for instance…> 2 year …2.85… Now when calculating effective duration for the portfolio. Do you simply sum this number across all other securities. or do you multiply this number by the appropriate weight and then sum. How can you distinguish that the number which they have given has already been multiplied by the weight or we have to do it ourselves??? I hope you understand my question. Thanks.

what page of what book?

the sum of the key rates for a bond is the duration

unless they explicitly say that they have already multiplied then i would assume you must multiply and come up withe the weighted average. because, obviously, if you have 90% of the portfolio in a 30 year bond and you just sum each individual key rate duration, you won’t come up with the correct portfolio duration

ryan page 308 book 4 schweser. Ryan is there any difference between key rate duration or rate duration. i.e if its written key rate duration it means they have not multiplied but when it says rate duration in table it means its with multiplication. or vice versa ie is there specific terminology for each ???

don’t have schweser but think Key Rate duration and rate duration are the same thing. referring to your original question, I think that the sum of the key rate durations would equal the duration of a Individual bond but not a bond portfolio like you’re describing.

If I’m not mistaken the key rate durations should be given. Your job is to find the duration of the portfolio given the weights and the key rate durations. Once u find that u multiply that together with the change in rates to give u the expected change in value of the portfolio.

Use the weighted average.