In aligning the risk exposures of a bond portfolio to those of a benchmark bond index, the purpose of matching key rate durations is: A. to better match cash flows. B. to hedge twists of the yield curve. C. to make adjustments for convexity.
Matching total duration will not necessarily hedge against changes in shape of the yield curve. Matching the durations of a few key rates along the yield curve will better hedge the fund against twists of the yield curve.
