Is there a standard method for estimating the sensitivity of a bond ETF's price to interest rate changes? Some of the information I have includes the average duration and the SEC yield.
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Duration is the time weighted average maturity, more or less.
The value of the ETF will drop as a function of the duration times the change in rates. For example, if the duration is 8 years, a .1% increase in rates will cause a drop of .8%.
answered May 12 '13 at 2:36
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