Research on Interest Rate Risk Management Based on Duration, Convexity and Immunization

Xiao Li; Yiye Lu

doi:10.54691/bcpbm.v26i.1974

Authors

Xiao Li
Yiye Lu

DOI:

https://doi.org/10.54691/bcpbm.v26i.1974

Keywords:

Duration; Convexity; Immunization strategy; Interst rate risks

Abstract

For bond investors and fundraisers, interest rate risk is an inescapable issue that requires attention. Therefore, efficiently measuring and preventing interest rate risk is a topic worthy of in-depth research. Duration, modified duration and convexity are tools that can be used to measure different interest rate risks. Based on the concepts of duration, immunization is introduced as an effective strategy to shield investors’ overall financial status. This paper mainly reviews the development and evolution of duration, modified duration, convexity and immunization strategy. In addition, the application scenarios of duration and convexity and improved immunization strategies are discussed and served as a reference for investors and financiers when hedging interest rate risks.

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