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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 ?
Lehiste, Teras, Ernstreits, Lippus, Pajusalu, Tuisk, Viitso (2008) have shown that secondary-stressed feet containing a geminate consonant also have shorter durations than primary-stressed feet of the same structure.
The analysis focuses on the comparison of the syllable rhyme durations and duration ratios in trisyllabic, tetrasyllabic and pentasyllabic words.
In order to analyse EMG responses according to SMT force events, seven time windows (see figure 2) that spanned across the entire SMT force curve were defined: a "Baseline" of 500ms duration to observe EMG activity before the SMT, a "Preload phase" of 1000ms, a "Thrust phase" and four phases which successively followed the "Thrust phase" with two windows of 250ms and two windows of 500ms (referred as "Post-SMT1" to "Post-SMT4" in figure 2 and 3).
Overall, modulating the impulse duration (125ms, 175ms, 225ms, and 275ms) led to significant differences in paraspinal EMG not only during the "Thrust phase" but also during "Post-SMT1" (all T8 ps < 0.01 and T6 ps < 0.05).
In natural speech the duration of speech segments depends on the context of speech, where that dependence is very complex and involves many factors [1].
Models for predicting the duration can be divided into two groups: rule-based models and corpus-based models.
However, the genetic influence on depressive symptoms increased to 53 per cent among twins with a short sleep duration of five hours per night and 49 percent among those who reported sleeping 10 hours per night.
The duration channel also arises from the existence of preferred habitat investors, and it likely existed during the pre-Fed era.
Even more telling is the distribution of durations in all positions (see Figure 1):
Adequate and effective sleep duration is the foundation of sleep health for children.
This article illustrates how duration can be applied to farmers' balance sheets.
This article reviews the evidence for duration dependence in job-finding rates and its implications for the unemployment duration distribution.