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A common gauge of the price sensitivity of a fixed income asset or portfolio to a change in interest rates.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
The government had already spent Rs 1.136 billion for the relief and rehabilitation works through PDMA in various disaster hit areas.
The Inaugural Lecturer said that 'when countries, regions, localities, communities, families or individuals are affected by disasters, they require international, national and other stakeholders from elsewhere to assist in order to stop the progression, reduce the impacts or prevent the recurrence of the disaster.
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Angara advised LGU officials they 'should not hesitate to spend their calamity funds for disaster preparedness.'
The expert said that it makes more economic sense to invest in risk reduction than to respond to a disaster when it already happened.
With this data on hand, when disasters occur, the North Sumatran Regional Disaster Management Agency will now have the ability to accurately and quickly gather information, which had been an issue in the past.
Inspired by the Sendai Framework for Disaster Risk Reduction 2015-2030, the purpose of Dev Forum 2018 was to encourage key leaders and managers in various sectors and industries to appreciate the need for understanding and strengthening disaster risk governance to better manage crisis and disaster risks, investing in disaster risk reduction for resilience, and enhancing crisis and disaster preparedness for effective response and recovery.
Tokyo (Japan), Nov 16 ( ANI ): Aeon Shinonome store conducted a disaster prevention seminar in the wake of destruction caused by natural disasters in various parts of the world.
At least 91% of all major disasters recorded from 1998 to 2017 were climate-related, recording 7,255 events during the period, showed the report titled as 'Economic Losses, Poverty and Disasters 1998-2017', which evaluated total disaster-related economic losses and fatalities in last two decades.