Effective duration

Effective duration

The duration calculated using the approximate duration formula for a bond with an embedded option, reflecting the expected change in the cash flow caused by the option. Measures the responsiveness of a bond's price - taking into account that expected cash flows will change as interest rates change due to the embedded option.
References in periodicals archive ?
Briys and Varenne (1997, 2001) calculated the effective duration of the liability associated with a single-premium participating contract having a minimum guaranteed rate of return.
This report contains information on Fannie Mae's business volumes, liquidations, delinquency rates and the effective duration gap.
To help prevent corticosteroid-induced osteoporosis, use the lowest effective dose for the shortest effective duration, and, if possible, use local or targeted corticosteroids.
The analytical measures include: yield, option-adjusted spread, effective duration, convexity, accrued interest, average life, and others.
Measures of effective duration take into account how changes in interest rates cause both changes in cash flows, through interest rate contingencies, and the effect on discounting.
Indeed, the knowledge of the valuation of insurance liabilities as given in expression (18) is most helpful; the interest rate sensitivity and the effective duration of these liabilities can be directly measured.
3) Thus, we wind up with estimates of effective duration of assets, where the reference rates of interest are Treasury rates.
31, 2008, the pool's weighted average effective duration stood at 0.
Average Life, Effective Duration and Average Credit Quality are based solely on the fixed income portion of the total portfolio.
1 Effective Duration (years) > > > > > > > > 4.
Other key covenants include limits on effective duration, utilization of leverage, and net asset value (NAV).
The overall effect of the 2015 Prepayment Model on fixed rate mortgage indices will be to extend effective duration which means that the model projects higher price sensitivity to potential interest rate shocks.