Duration Risk

Duration risk means the risk that a bond or asset will lose value when interest rates rise. In simple terms, duration risk shows how sensitive something is to changes in interest rates. Duration risk is important because longer-term bonds and long-duration stocks can be more affected by rate changes. When rates rise, assets with high duration risk may fall more sharply. For example, a long-term bond usually has more duration risk than a short-term bond. Duration risk is not only about bonds. Growth stocks can also behave like long-duration assets because much of their value depends on expected future earnings.