MLARM Practice Questions - PRMIA Market, Liquidity & ALM Risk Certificate Exam

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Why is key rate duration (KRD) preferred over a single modified duration measure for managing a non-parallel yield curve risk?

KRD captures the bond's sensitivity to changes at specific maturity points (e.g. 2y, 5y, 10y, 30y), allowing the manager to hedge twists and butterflies that a single duration cannot KRD is always smaller than modified duration KRD ignores convexity entirely KRD applies only to floating-rate notes

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KRD captures the bond's sensitivity to changes at specific maturity points (e.g. 2y, 5y, 10y, 30y), allowing the manager to hedge twists and butterflies that a single duration cannot

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