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Key Rate Duration

Sensitivity to rate changes at specific maturity points on the curve.

Key rate duration measures how a bond's price changes when a single point on the yield curve shifts by 1bp while all other points remain fixed. Unlike modified duration (which assumes parallel shifts), key rate durations reveal where on the curve a bond is most sensitive. The sum of all key rate durations approximately equals the bond's effective duration.

Formula
KRDk=−1P∂P∂yk\text{KRD}_k = -\frac{1}{P} \frac{\partial P}{\partial y_k}

Related Terms

Modified Duration

Measures the percentage price change for a 1% yield change.

Curve Steepening

Long-term rates rise relative to short-term rates.

Curve Flattening

Long-term rates fall relative to short-term rates.

Parallel Shift

A uniform change in yields across all maturities.