Mitigating Financial Volatility: The Role of Duration in Interest Rate Risk Management

Abstract

Duration is a resource that investors can use to lower interest rate risk. The purpose of this research is to analyze the bond market and to join bonds. An investor has many reasons to choose bonds as part of their portfolio and use Duration to value the risk. When choosing to bond, the way to measure whether it suits the portfolio is to balance risks. Therefore, it will be more suitable for investors to join more than two kinds of financial products in a portfolio. The method introduced in this passage is the Duration of the calculation, and the usage will be written clearly. When calculating the Duration, it is important to calculate the yield of maturity and be familiar with the process. It is also essential to list the face and present values in a table to clarify the data when calculating the Duration. Also, when calculating the Duration, it is crucial to look at the view in a portfolio and balance it in a higher position.