What causes a high duration?

Quantitative Finance Level 3

Which of the following statements is true?

A bond with a higher coupon rate has a higher duration A bond with a higher credit risk has a higher duration A bond with a higher maturity time has a higher duration None of the rest A bond with a higher yield rate has a higher duration

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Calvin Lin by Calvin Lin

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1 solution

Chew-Seong Cheong
Mar 24, 2015

Duration depends on time to maturity, yield and coupon rates together; and not on only one of them.

0 Helpful 0 Interesting 0 Brilliant 0 Confused

The question isn't about "depend on". The question is what causes a higher duration. Thus, you have to explain why a lower coupon rate, maturity, credit risk, yield would lead to a higher duration.

Calvin Lin Staff - 6 years, 2 months ago

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