Sensitivity

Duration is an indicator that measures the percentage change, both upward and downward, in the price of a bond or the net asset value of a mutual fund, caused by a 1% fluctuation in market interest rates.

For example, the net asset value of a fund with a duration of 3 will increase from 100 to 103 when rates fall by 1%, and conversely from 100 to 97 when they rise by 1%.