Properties of duration drift

Duration requires active monitoring because it is sensitive to the yield, resulting in duration drift. Duration drift determines the portfolio's exposure to rate changes, and hence it can be used as a measure of immunisation risk. However, research has barely focused on the properties of duration drift. This study demonstrates how the structure of cash flows affects duration and its drift, how duration drift itself responds to a change in the yield and what conditions affect the stability or reactivity of duration. With these results, we discuss the conditions under which the immunisation strategy must be guarded against reactive duration and high immunisation risk.