Business and Personal Finance Dictionary

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• TERM STRUCTURE OF INTEREST RATES AND VOLATILITY
  
  Refers to the variability of short-term rates relative to longer-term rates. It has been documented that short-term rates exhibit greater variability or volatility than long-term rates. However, longer-term instruments experience greater price sensitivity than short-term instruments for a given change in the underlying rate. A quick measure of this price sensitivity is provided by duration. Typically, debt instruments without option features, explicit or implicit, have greater duration with longer maturities. Zero coupon securities tend to have the greater price sensitivity relative to coupon paying securities. See Duration.
  
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