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Modified Duration
Modified duration measures the sensitivity of a financial instrument’s price to changes in interest rates. It estimates the percentage price change for a given rate movement.
In oil trading, modified duration is most relevant for interest-rate-linked derivatives and financing structures. It helps traders assess exposure to monetary policy shifts.
Higher modified duration implies greater price sensitivity and risk. Traders use it to balance portfolios and hedge interest rate exposure.
Though less central than price risk, duration risk can materially affect long-dated energy trades.