Sensitivity

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Sensitivity Analysis

    A technique used to determine how different values of an independent ...
  2. Bond

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

    A security that represents ownership in a corporation. Holders ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) ...
  5. Financial Instrument

    A real or virtual document representing a legal agreement involving ...
  6. Next Generation Fixed Income (NGFI) ...

    A Next Generation Fixed Income (NGFI) manager is a fixed income ...
Related Articles
  1. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  2. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  3. Active Trading Fundamentals

    Bet Smarter With The Monte Carlo Simulation

    This technique can reduce uncertainty in estimating future outcomes.
  4. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  5. Mutual Funds & ETFs

    Preferred Stock ETFs: Are They Right for You?

    Considering preferred stock ETFs? Here's a look at their pros and cons.
  6. Mutual Funds & ETFs

    PIMCO vs. BlackRock: Weighing Mega Fund Managers

    A look at the world's biggest bond manager and the world's largest asset manager.
  7. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.
  8. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.
  9. Investing

    Strategies To Position Your Bond Portfolio

    Fixed income investors may not be able to see them all right now, but important trends are stirring on the investment horizon.
  10. Savings

    How To Make Money With Airbnb: Risks & Rewards

    Airbnb lets you turn your home or spare room into extra cash. Here's how to make money and protect yourself from the risks.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center