GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW) | ||||||
---|---|---|---|---|---|---|
|
06:22 Aug 18, 2015 |
Polish to English translations [PRO] Bus/Financial - Investment / Securities / fundusze inwestycyjne | |||||||
---|---|---|---|---|---|---|---|
|
| ||||||
| Selected response from: Frank Szmulowicz, Ph. D. United States Local time: 06:01 | ||||||
Grading comment
|
Summary of answers provided | ||||
---|---|---|---|---|
3 | duration/weighted average maturity |
|
Discussion entries: 2 | |
---|---|
duration/weighted average maturity Explanation: Interest Rate Risks Bond fund returns are highly dependent on the changes in general interest rates; that is, when interest rates increase, the value of bonds decrease, which in turn affects bond fund returns. To understand interest rate risk, you must understand duration (see the tutorial chapter Advanced Bond Concepts: Duration). Duration, in the simplest terms, is a measure of a bond fund's sensitivity to interest rate changes. The higher the duration, the more sensitive the fund. For example, a duration of 4.0 means that a 1% interest rate rise causes about a 4% drop in the fund. Duration is considerably more complex than this explanation but when comparing one fund's interest rate risks to another, duration offers a good starting point. As an alternative to duration, weighted average maturity (WAM) also known as "average effective maturity," is an easier metric to comprehend. WAM is the weighted average time to maturity of the bonds in the portfolio expressed in years. The longer the WAM, the more sensitive the portfolio will be to interest rates. However, WAM is still not as useful as duration, which gives you a precise measurement of interest sensitivity, while WAM gives you only an http://www.investopedia.com/articles/mutualfund/05/062805.as... |
| |
Grading comment
| ||
Login to enter a peer comment (or grade) |
Login or register (free and only takes a few minutes) to participate in this question.
You will also have access to many other tools and opportunities designed for those who have language-related jobs (or are passionate about them). Participation is free and the site has a strict confidentiality policy.