A measure of a bond's price sensitivity to a change in yield, close to the weighted average time to its cash flows. Longer duration means a larger price change for a given yield move.
Where you will meet it
Duration comes up in 32 learning outcome notes across the FRM syllabus.
A few of them:
Insurance Companies and Pension Plans FRM Part I · Financial markets and products
“Investment risk comes from credit, market and interest rate moves and from asset-liability duration mismatch.”
How Do Firms Manage Financial Risk? FRM Part I · Foundations of risk management
“Derivatives change exposure by their delta or duration equivalents.”
External and Internal Credit Ratings FRM Part I · Valuation and risk models
“Let D be the bond's modified duration and Δy the change in its yield.”
Credit Value at Risk FRM Part II · Credit risk measurement and management
“For a small change in spreads, the approximation is Loss = market value × spread duration × change in spread.”
GARP does not endorse, promote, review, or warrant the accuracy of the products or services offered by Charta Learning, nor does it endorse any pass rates claimed by Charta Learning. Further, GARP is not responsible for any fees or costs paid by the user to Charta Learning. FRM® and GARP® are registered trademarks owned by the Global Association of Risk Professionals, Inc. The questions, explanations and study notes are written for this product and are not GARP curriculum material.