Modern fixed-income portfolio management increasingly includes the use of duration as a means of achieving a desired balance between risk and return. One of the most important characteristics of duration targeting strategies is the focusing of the return distribution on a minimum-variance point. This point occurs when the duration is equal to one-half the investment horizon. The results of empirical test of duration targeting strategy in Korea fixed-income market indicate that this strategy offers greatly reduced return volatility over most of the investment horizon, but only partial, rather than full, immunization.
