Chuang-Chang Chang^* and Ra-Jian Ho

Using the duration measures defined by Bierwag (1996), we derive the formulae of duration for zero-coupon bonds, coupon bonds and bond portfolios under the Heath, Jarrow, and Morton (1990) (HJM) term structure framework. The advantage of using Bierwag's duration measure is that it provides a one-to-one correspondence with the returns on interest rate sensitive securities. Hence, this duration measure can make the performance of risk management on interest rates better. We also investigate the differences of duration for coupon bonds between our formula and the conventional Macaulay's measure. Finally, we show that the performance of dynamic immunization strategy is much better than that of static immunization strategy.