Key rate duration is the measure of price sensitivity of a security given a percent change in YTM (Yield to maturity)
The maturity period has a major effect on the sensitivity. A longer term’s bond will be more sensitive to the changes in interest rate movements than a bond that has a shorter term of maturity.
The formula :
Key Rate Duration = (P- - P+)/ (2 * 0.01 * P)
P- = Price after a 1% decrease
P+= Price after a 1% increase in yield
P = the original Price
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