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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 ?
The Guidelines also state that dispositional and durational departures are separate decisions, requiring separate justification.
Clear and convincing evidence would have been required to overcome the presumption when a party seeks durational alimony following a short-term marriage.
The typical result for experiments like this is that for intensity contrasts, subjects prefer groupings with the most prominent element first, whereas for durational contrasts, subjects prefer groupings with the most prominent element last.
153) Additionally, evidenced by the disconnect between state provisions and scholarship addressing durational limits on prediction and restoration of incompetent defendants, further study of these lingering questions is needed to aid states in developing reasoned legislation that adequately fulfills Jackson's due process requirements.
Court has struck down durational residency requirements lasting longer
Durational time accounts for the bridge to the past that sites of memory represent: "I n the realm of durational time, no one recovers because nothing is recovered, only uncovered and then re-covered, buried again beneath the fruitless struggle to expose 'the way it was'"(Langer 1995:15).
At a minimum, this would involve a durational residency requirement.
The counter-argument is that "treatment limitation" refers only to durational limits (limits on visits or days of coverage) that are spelled out in that particular section of the law.
Such concepts as beat accentuation and meter are methodically reviewed through cognitive-psychological templates (synchronicity, hierarchical grouping, attentional constraints, durational patterning, expressive timing, cyclic isochrony).
Of the four states, Arizona received the bulk of the forces (40 percent) in the form of both rotational and durational forces.
Therefore, the continuous objective function expected by the simplex algorithm is in fact discontinuous and durational adjustments by simplex iteration are not properly reflected in the objective function.
Bo-kyung, like each of the other three protagonists who have come before her in this film (most notably her husband, who waits for a bus and a businesswoman), inhabits a durational "dead zone," a temporal aberration in which she becomes attuned to the "eerie specificity" of nearby objects (Hyo-sup's laundry, hung to dry; a neighbor's nearby tangerine tree; etc.