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Duration and Risk

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  • Gerald Brown

Abstract

Duration has long been used as a means of managing the risk of bond portfolios. It has also been extended to the analysis of equities. Although it is often been compared with the half-life of an asset, it is more correct to consider duration as the approximate percentage change in price for each 1% change in yield. Given this view, it will be seen that the volatility of an asset and its duration are closely related.This article uses the duration of a conventional valuation model to estimate the ex ante volatility and total risk of the commercial property market in the United Kingdom. The approach has potential value in estimating the risk of a new property where historic time series information is either limited on not available.

Suggested Citation

  • Gerald Brown, 2000. "Duration and Risk," Journal of Real Estate Research, Taylor & Francis Journals, vol. 20(3), pages 337-356, January.
    • Handle: RePEc:taf:rjerxx:v:20:y:2000:i:3:p:337-356
    DOI: 10.1080/10835547.2000.12091038
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