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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
References in periodicals archive ?
We conduct further numerical analyses in the section "Numerical Analysis for Natural Hedging Strategy." For the case of a small change in mortality (10 percent mortality shift), we use the concept of effective duration for the immunization strategy and calculate the optimal product mix [[omega].sup.*.sub.life] = [D.sup.annuity.sub.e[mu]]/[D.sup.annuity.sub.e[mu]] + [D.sup.life.sub.e[mu]] under the first-order approximation.
The 10-20 year fund has an effective duration of 9.38 years, according to iShares, while the 20+ fund's effective duration is significantly higher at 14.61 years.
In practice, the period between the filing of a patent request for a new drug and authorisation for the marketing of that product reduces the effective duration of patent protection to period deemed inadequate for recovering investment in research.
To contrast this hypothesis, this paper presents a model that analyzes the risky-prices sensitivity to interest rate changes through effective duration and convexity.
To help prevent corticosteroid-induced osteoporosis, use the lowest effective dose for the shortest effective duration, and, if possible, use local or targeted corticosteroids.
Clearly, however, such aggregate data, even with some attempt to control for the delay between cause and effect, are totally inappropriate for surveillance because they do not take into account effective duration of smoking (which was considerably higher in the Netherlands in 1960 than in postwar Japan) and because they do not allow for international differences in smoking characteristics, such as the tar and nicotine content of cigarettes consumed, degree and frequency of inhalation, length of cigarette remaining when discarded, and use of nonmanufactured cigarettes.
The fund has an effective duration of 7.53 years, putting it in intermediate territory and that duration is high enough to imply some positive correlation to the recent rate cut.
The fund invests in municipal securities that are exempt from federal income taxes, and seeks to maintain a portfolio with an intermediate effective duration of between three and 10 years, including the effects of leverage.
The index's construction utilises an optimisation process which has primary objectives of maximising exposure to our proprietary credit-score, while also maintaining an option adjusted spread and effective duration similar to the eligible universe.
It combines EDI's fixed income and pricing data with algorithm apps from The Beast Apps, a provider of a cloud based Financial App Store offering access to data, analytics, risk and valuation services, to generate an initial set of 11 fixed income derived data fields such as Yield to Maturity, Modified Duration, Effective Duration and Convexity.
We employ both effective duration and modified duration as the measures of interest rate sensitivity in this study.