Duration is a critical concept in fixed income investing, as it helps investors understand the interest rate risk associated with a bond or a portfolio of bonds. The longer the duration, the more sensitive the bond price is to interest rate changes. Duration is used to estimate the potential price changes in response to changes in interest rates: if interest rates rise, bond prices typically fall, and the longer the duration, the greater the price decline. Duration helps investors manage risk by providing insight into how a bond or bond portfolio will react to interest rate movements.
