Key Rate Duration & Key Rate Shifts Explained

[@RyanOConnellCFA]

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[@hernanalzate1582]

Hi Ryan, thx for sharing your models with us; just a minor comment regarding KRDs; it seem you have a 'sumproduct' calculation in cell C10, rather than the KRD calculation presented in the formula on the left, where KRD = [P_ + P+ / 2*0.01*P0]

[@tinayang5342]

Thank you Ryan for explaining this. Really helpful!

[@RyanOConnellCFA]

My pleasure Tina!

[@suibo7776]

THANK YOU, RYAN!!! I've had difficulties visualizing this topic from online resources but your videos have really helped me

[@RyanOConnellCFA]

Happy to help!

[@kunal_nandurkar21]

You're an amazing teacher! I couldn't thank you enough. Your videos on Fixed Income subject area helped me a lot.

[@RyanOConnellCFA]

You are so welcome! Really happy to hear it

[@vivian5448]

very well explained

[@RyanOConnellCFA]

You're welcome!

[@marlowisws]

Hi Ryan, This was very clearly explained, but I'm still a bit confused. I thought Key Rate Duration was the duration at a key rate, that is, the 3 year rate or the 2 year rate. So the 2 year Key Rate Duration is XYZ, showing investors what a change to the 2 year spot rate would be to the bond. But you have explained it as an entire curve-concept. Or am I misunderstanding? Thanks!

[@RyanOConnellCFA]

Hey Chris, I think for most intents and purposes (most tests or classes) they will be referring to Key Rate Duration as as just a single rate like you mentioned. That is likely the extent of the concept you'll need to understand if you were watching this video for a test or certificate I'd imagine

[@oea8964]

@@RyanOConnellCFA KRD = sumproduct of adjustment with Period*Weight, it does NOT look right. You should use PV in F5 as the original and get a new PV with Shifted Curve for KRD

[@machoasp]

Hello..I have a detailed query..can I mail you the same

[@RyanOConnellCFA]

Please feel free to send it to the email in the description Anoop

[@msppg769]

Wonderful video. Im so thankful that I can watch it for free. Thank you Ryan

[@RyanOConnellCFA]

Thank you for watching and for taking the time to leave a nice comment

[@JamesReynolds-z8b]

This was a very straightforward and helpful explanation. Thank you Ryan!

[@RyanOConnellCFA]

Thank you for the positive feedback James!

[@downy326]

Thank you! that was really helpful

[@RyanOConnellCFA]

It is my pleasure!

[@Ramses-fw8id]

You explain so well, you are smart

[@RyanOConnellCFA]

Thank you Ramses, it is more about having spent lots of time on the topics rather than being smart haha

[@Ramses-fw8id]

What a nice gentleman, you are

[@RyanOConnellCFA]

I appreciate it Ramses!

[@thatquantguy]

Yesssss you uploaded!!

[@RyanOConnellCFA]

Your avatar is amazing Josh! I finally got back on the video grind and have been uploading 2 videos per week. Going to try to stay very consistent now

[@muforlife7460]

Mr, Iloveyou

[@RyanOConnellCFA]

Haha thank you!

[@alanoliveiramoreno2309]

Ryan, I really enjoy our content really bring to life the topics cover in CFA. in this topic I only make one adjustment. When you are calculating the duration, you are calculating the Mac Duration. One additional adjustment is calculate the YMT for the original curve, then calculate the Duration= Mac Dur/ (1+YTM). And the hole point about calculating Duration is to estimate the impact on Price of a bond without the actual calculation. So for the test consistency for your calculation, the real calculation (column J8) need to be very closer to the x% expected shift yield curve multiply by Duration multiply by the original present value of column f. Calculating the impact on present value of a bond without the adjustment for YTM can be very different from the real calculation.

[@RyanOConnellCFA]

Thank you for the contribution Alan, really appreciate it! It will be helpful for others to read about the nuances of the concept in your comment

[@machoasp]

Key rate duration of 7.67..how can you intepret it

[@RyanOConnellCFA]

I think of it as an overall measure of the ratio of how much the price will change for a given change in interest rates

[@luisramos2583]

Amazing Video. Thank you very much Ryan.

[@RyanOConnellCFA]

Much appreciated Luis!