What is 'key rate duration' in SAP FS-BA-AN-STA - Strategy Analyzer?

key rate duration - Overview

• Component: FS-BA-AN-STA

• Component Name: Strategy Analyzer

• Description: Relative change to the present value brought about by the shift in a key rate.

key rate duration - Details

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  Key Concepts: 
  Key rate duration is a measure of the sensitivity of a financial instrument’s value to changes in interest rates. It is calculated by taking the weighted average of the present values of the cash flows associated with a financial instrument, with the weights being proportional to the percentage change in the instrument’s value for a given change in interest rates. 
  
  How to use it: 
  The key rate duration can be used to measure the impact of changes in interest rates on the value of a financial instrument. It can also be used to compare different instruments and determine which one is more sensitive to changes in interest rates. The FS-BA-AN-STA Strategy Analyzer module in SAP provides tools for calculating key rate duration and analyzing its impact on financial instruments. 
  
  Tips & Tricks: 
  When using key rate duration, it is important to remember that it only measures the sensitivity of a financial instrument’s value to changes in interest rates. It does not take into account other factors such as credit risk or liquidity risk that may also affect the value of an instrument. 
  
  Related Information: 
  For more information on key rate duration and how it can be used, please refer to SAP’s documentation on FS-BA-AN-STA Strategy Analyzer. Additionally, there are many online resources available that provide further information on this topic.