DEFINITION of 'Sensitivity'

The magnitude of a financial instrument's reaction to changes in underlying factors. Financial instruments, such as stocks and bonds, are constantly impacted by many factors. Sensitivity accounts for all factors that impact a given instrument in a negative or positive way in an attempt to learn how much a certain factor will impact the value of a particular instrument.

BREAKING DOWN 'Sensitivity'

Interest rates are one of the most important underlying factors in the movement of bond prices and are closely watched by bond investors. These investors get a better idea of how their bonds will be affected by interest rate movements by incorporating sensitivity into their analyses.

  1. Bond

    A debt investment in which an investor loans money to an entity ...
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  3. Common Stock

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  4. Financial Instrument

    A real or virtual document representing a legal agreement involving ...
  5. Duration

    A measure of the sensitivity of the price (the value of principal) ...
  6. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
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