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Thank you both for your replies! Very helpful indeed. My concern was artificially lowering the duration of the portfolio but the example above illustrates the point differently. Appreciated!

Hi all - would love to get some insight and feedback on this. What would be an accurate representation of a portfolio duration that holds defaulted bonds? Let's 20% of total market value is in default securities. Would you weight those bonds using a duration of 0 or exclude their market values...

That's very helpful. Thank you!!

Hi Matthew - thanks very much for your reply! To give you context - this has come up in an attempt to conduct a stress test. So, I would shock a 5 yr maturity by lets say 100bps. I'm okay with this. But additionally, it appears that I need to shock the neighboring key rates. Using linear...

Hello everyone, I'm new here on the board. Came across a situation in my professional setting where the idea of using linear interpolation to shock neighboring key rates when conducting a stress scenario using a key rate. Don't quite grasp this concept? Why would this be necessary, what is the...