Macaulay duration


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Macaulay duration

The weighted-average term to maturity of the cash flows from a bond, where the weights are the present value of the cash flow divided by the price.
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Treasury bonds from the data sources described in the previous section, we compute the Macaulay duration of each bond each month to form a monthly time series of the aggregate duration risk of U.
We begin by computing the Macaulay duration of each option-free bond.
The traditional Macaulay duration of insurance liabilities is equal in this model to the maturity of the life insurance policy.
In other words, it represents the Macaulay duration of the policy.
4) The most widely used method for hedging bond portfolios is duration immunization, which matches the Macaulay duration of assets and liabilities.
These, in general, find that Macaulay duration performs as well as other linear models relating price and yield changes, although simple maturity did nearly as well in some cases.
The Macaulay duration of an instrument can be calculated by first multiplying the time until the receipt of each cash flow by the ratio of the present value of that cash flow to the instrument's total present value.
Because a zero coupon instrument has only one cash flow, its Macaulay duration is equal to its maturity.
When analyzing the interest rate sensitivity of a portfolio of assets, the most widely used measure, in part due to its simplicity, is the Macaulay duration of the portfolio.
In examining interest rate risk, Staking and Babbel rely on simple Macaulay duration to calculate the duration of assets and liabilities.
The first clarification we need to make is that we did not employ Macaulay duration measures.
We see this as additional evidence that the potential bias suspected by Barney was avoided through our conversion of modified Macaulay duration measures to effective duration measures using the same reference rates of interest.