One problem with duration hedges is that they are only accurate for very small changes in the interest rate.

Name: One problem with duration hedges is that they are only accurate for very small changes in the interest rate.
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Question

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Duration hedges assume a linear relationship between bond prices and interest rates, which is only accurate for small changes in interest rates. For larger changes, the relationship becomes nonlinear, leading to inaccuracies.

One Problem with Duration Hedges Is That They Are Only