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. Common Stock

    A security that represents ownership in a corporation. Holders ...
  2. Bond

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

    A measure of the sensitivity of the price (the value of principal) ...
  4. Sensitivity Analysis

    A technique used to determine how different values of an independent ...
  5. Financial Instrument

    A real or virtual document representing a legal agreement involving ...
  6. Treasury Direct

    The online market where investors can purchase federal government ...
Related Articles
  1. A Primer On Preferred Stocks
    Bonds & Fixed Income

    A Primer On Preferred Stocks

  2. Forces Behind Interest Rates
    Economics

    Forces Behind Interest Rates

  3. Bet Smarter With The Monte Carlo Simulation
    Active Trading Fundamentals

    Bet Smarter With The Monte Carlo Simulation

  4. Interest Rates And Your Bond Investments
    Investing Basics

    Interest Rates And Your Bond Investments

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center