What does the phrase "duration is an objective measure of interest rate risk" mean?

CFA Level III
#1

[original post removed]

#2

It means you can calculate how much bonds will move if interest rates change.

#3

The objective of duration is to explain the value of the bond’s sensitivity to small paralell shifts in interest rates.

#4

I know what duration measures or calculates. I often come across the two words “objective/absolute” when the word duration is explained. I want to know what these two words mean in the context of duration. Thanks already.

#5

I know what duration measures or calculates. I often come across the two words “objective/absolute” when the word duration is explained. I want to know what these two words mean in the context of duration. Thanks already.

#6

I know what duration measures or calculates. I often come across the two words “objective/absolute” when the word duration is explained. I want to know what these two words mean in the context of duration. Thanks already.

#7

They mean the same thing in any other context. It’s not the Da Vinci Code (aka da code). It’s just plain English. Comprendez?

#8

Whenever you associate the word “absolute” to some concept, the other word that comes to mind is “Relative”. And thats how curiosity was killing the cat :slight_smile:

#9

Dont overthink it. They just mean that Duration is a measure of interest rate sensitivity. They’re a first order risk

#10

Thanks bud…!