• Key rate duration calculates the change in the price of a bond relative to the change in yield by 100 basis points (1%) for a given maturity.

  • When the yield curve has a parallel shift, you can use the effective duration, but the key rate duration must be used when the yield curve moves non-parallel in order to estimate changes in the value of the portfolio.
  • Duration measures tell you the price risk associated with holding fixed income securities when interest rates change.