Glossary: FI Module 13 — Curve-Based and Empirical Duration

Term	Definition
Effective duration	Duration calculated using benchmark curve shifts; required for bonds with embedded options
Key rate duration (partial duration)	Sensitivity of a bond’s price to a change in the spot rate at a specific maturity, holding all other rates constant
Partial duration	Synonymous with key rate duration
Shaping risk	The risk of non-parallel yield curve changes (steepening, flattening, twisting)
Empirical duration	Duration estimated by regressing historical bond price changes on benchmark yield changes
Analytical duration	Duration calculated from the bond’s cash flow structure and pricing model (closed-form)
Spread duration	Sensitivity of a bond’s price to changes in its credit spread
One-sided duration	Duration calculated using only a yield increase or only a yield decrease; useful for callable/putable bonds
Benchmark yield curve	The government or swap curve used as the reference for effective duration calculations
Parallel shift assumption	The simplifying assumption that all spot rates change by the same amount

See also: Duration, Convexity