Which of the following is NOT a weakness of duration gap analysis?
A) It is difficult to accurately compute duration.
B) Each future cash flow must be discounted by the appropriate future interest rate.
C) The duration of a portfolio must be constantly monitored.
D) It is difficult to estimate the duration on zero coupon bonds.
E) All of the above are weaknesses of duration gap analysis.

Question

Quizplus · Accepted Answer

Duration gap analysis primarily involves assessing the sensitivity of the value of assets and liabilities to changes in interest rates. The duration of zero coupon bonds is actually straightforward to estimate because they have only one cash flow at maturity, making their duration equal to their time to maturity. This simplicity contrasts with the complexities involved in estimating the duration of bonds with multiple cash flows.

Which of the Following Is NOT a Weakness of Duration