Bond Duration measures the sensitivity of a bond’s price to a change in interest rate. It is an important calculation for bond investors, as an increase in duration can increase the risk of a bond’s price changing due to interest rate movements. Generally, longer duration bonds are more sensitive to interest rate movements, while shorter duration bonds carry less interest rate risk. Knowing the duration of a bond can help investors better assess the risk of their investments, and measure the impact of interest rate changes. Duration is a tool used by both individual and institutional investors to get a clear view of the potential risks posed by a bond investment.
A Bond Forex is a finance instrument that tracks the performance of a bond against a base currency, usually the U.S. dollar. The duration of a Bond Forex is the amount of time until the expiration of the contract, after which the investor can either make a profit, or lose money depending on the movement of the exchange rate. Generally, the longer the duration of a Bond Forex, the higher the risks associated with the trade.
