Durat,on a necessary, partnofnealyrsysbso toolkit for analyzing interest rate risk. Most of the duration models currently in use are single-term
models, but two- or more-term duration models have been attracting attention recently.
          Unfortunately, there is considerable confusion about the meaning of these models and their proper uses. Academicians and practitioners alike often confuse the second- and Fugher-order terms in models that explain the instantaneous price elastiaty of a security with respect to interest rates with the terms in multi-factor models that explain non-instantaneous bond returns.
        This paper demonstrates that the higher-order terms in price elastiaty models are not necessarily the same as the additional factors in bond return models,although they may at times look alike. Failure to recogruze this difference may lead to poor predictions and possibly rejection of the usefulness of duration-based models. See, for example, Bierwag, Kaufman,Latta, and Roberts (1987) and Gultekin and Rogalski(1984).