[Verse 1]
When interest rates start to climb and fall
Bond prices move but not the same for all
Some bonds are sensitive, some barely budge
Duration's the measure that helps you judge
It's not just time until the bond matures
It's weighted average of cash flows for sure
[Chorus]
Duration, duration, price sensitivity's key
When rates go up one percent, how much will prices flee
Duration, duration, multiply to see the change
Higher duration means more risk within your range
D-U-R-A-T-I-O-N, the tool that portfolio managers depend
[Verse 2]
A bond with duration of five whole years
Will drop five percent when rates shift upward here
But if the duration is only two
Then two percent drop is what you'll view
Modified duration gives the best insight
For small rate changes, it gets it right
[Chorus]
Duration, duration, price sensitivity's key
When rates go up one percent, how much will prices flee
Duration, duration, multiply to see the change
Higher duration means more risk within your range
D-U-R-A-T-I-O-N, the tool that portfolio managers depend
[Bridge]
Long maturity means higher duration usually
Low coupon payments increase it substantially
Want to reduce your portfolio's risk today
Choose shorter duration, that's the safest way
But if you think that rates will fall down low
Longer duration helps your returns grow
[Verse 3]
Portfolio duration is weighted average too
Each bond's duration times its weight shows you
The overall sensitivity of your mix
When interest rates change, you'll know what to fix
Match your duration to your timeline goals
Duration matching gives you control
[Chorus]
Duration, duration, price sensitivity's key
When rates go up one percent, how much will prices flee
Duration, duration, multiply to see the change
Higher duration means more risk within your range
D-U-R-A-T-I-O-N, the tool that portfolio managers depend
[Outro]
From immunization to active bets
Duration helps you manage threats
It's the bond investor's best friend
Duration, duration till the end