Scenario: low rates; steep yield curve: I want to control the portfolio market risk using the benchmarks’.
In selecting the benchmark, I want to go longer duration because I have greater total return potential
Do you see anything wrong re market risk?
The answer says, longer maturities are more sensitive to interest rates. So the statement re market risk is inaccurate. I may be fatigued but do not find the connection. Any help?
longermaturities have more interest rate risk, not market risk is my guess.
i thought market risk=interest rate risk=duration risk etc
true, your right.
maybe they mean even though there is increased total return potential in the longer maturities, in general, they have longer duration, therefore more market risk, and more risk in general.
This is not consistent with the statement saying they want to control risk. Controlling risk would probably involve going short duration.