Duration gap

CFA Level I Glossary

Duration gap compares Macaulay duration of an asset or portfolio with the investment horizon. A positive gap (duration longer than horizon) means rising rates hurt reinvestment-adjusted outcomes in the classic immunization story; a negative gap fears falling rates. The idea links interest-rate risk to whether you are long or short duration relative to when you need the money. People reverse the sign of the risk narrative under stress.

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