easy · Principles of Finance valuation
What is the primary risk addressed by 'Key Rate Durations' that a single 'Effective Duration' metric might miss?
- The risk that the issuer's credit rating will be downgraded.
- Non-parallel shifts in the yield curve (twists or butterfly moves).
- The probability that the bond will be called before maturity.
- The impact of inflation on the purchasing power of the bond's coupons.
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