Duration as a pure measure of interest rate risk only works for
A) parallel shifts in the yield curve.
B) small increases in interest rates.
C) small decreases in interest rates.
D) a steepening of the yield curve.

Question

Quizplus · Accepted Answer

Duration as a pure measure of interest rate risk is most accurate for parallel shifts in the yield curve, as it assumes a linear relationship between yield changes and price changes, which holds best for parallel shifts.

Duration as a Pure Measure of Interest Rate Risk Only