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by stephenbez
602 days ago
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One metric of how bonds are susceptible to interest rate changes is duration [1]. My calculations show that for a 4 week to maturity T-bill, the duration is approximately 0.077, meaning that if interest rates go up by 1%, it loses 0.07%. So even if rates go up by 5% in a week, they only lose 0.35%. The problem with SVB is they weren’t holding very short dated bonds. Pretty much every large company has to deal with interest rate risk but as long as they keep the average duration low it doesn’t tend to be an issue. [1] https://en.m.wikipedia.org/wiki/Duration_(finance) |
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