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A common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates.


The amount by which a bond's price increases or decreases as the result of a 1% change in interest rates. When interest rates rise above a bond's own interest rate, its price usually declines because an investor can earn a higher yield with another bond. Likewise, when interest rates fall, the bond's price usually rises. Duration measures how much the price changes and, for that reason, is a measure of a bond's volatility.


The number of years required to receive the present value of future payments, both interest and principal, from a bond. Duration is determined by calculating the present value of the principal and each coupon and then multiplying each result by the period of time before payment is to occur. The concept of duration is used to relate the sensitivity of bond price changes to changes in interest rates. Also called mean term.


In simplified terms, a bond's duration measures the effect that each 1% change in interest rates will have on the bond's market value.

Unlike the maturity date, which tells you when the issuer has promised to repay your principal, duration, which takes the bond's interest payments into account, helps you to evaluate how volatile the bond's price will be over time.

Basically, the longer the duration -- expressed in years -- the more volatile the price. So a 1% change in interest rates will have less effect on the price of a bond with a duration of 2 than it will on the price of a bond with a duration of 5.

References in periodicals archive ?
We agree that some epidemics, especially if they are limited and develop well after the disaster, may remain undetected, as was discussed in our paper (1).
Employers can claim new tax credits for hiring and retaining certain employees in the core disaster area.
Any individual whose main home is located in the disaster area; see, e.
The agreement among the three entities was to undertake a pilot program to assist taxpayers at local disaster recovery centers following federally declared disasters.
This means that in the event of a disaster, the United States could face a disruption in airport screening or delays in processing government disaster assistance grants, the audit warned.
A closed network protects and secures data and equipment, and the school has agreements with several external vendors and service providers to help out in time of a disaster, for both telecommunications and hardware repair.
The consequence of this choice is that the book makes no reference to the societal and psychological impacts of disasters.
After Disaster Strikes: How to Recover Financially from a Natural Disaster was issued by NEFE in 1997 in collaboration with the American Red Cross and the Federal Emergency Management Agency; Regaining Financial Balance was published by the AICPA to guide people affected by the Sept.
A prearranged MOU might allow the nursing home to house burn victims for a few hours in the facility while emergency medical personnel from a nearby hospital perform triage; in exchange, the nursing home would ask the hospital to provide similar coverage if disaster made it necessary to evacuate the SNF.
Protecting data backups offsite is a necessary precaution for disaster recovery, and multiple generations of backups provide the ability to recover to the optimal point in time.
society and anticipating the need for mental health interventions, the Disaster Relief Act of 1974 (1974) mandated, among other services, crisis counseling for all victims.